PROBLEMS STEMMING FROM AIRLINE MERGERS AND ACQUISITIONS

The recent popularity of acquisitions and mergers in both the United States and Canada makes it desirable to investigate the results of such corporate moves on airline performance. To that end, this paper analyzes the effects of acquisitions and mergers on the surviving carriers' operating expenses, number of points (airports) served, traffic, and profit. First, some historical findings regarding the US mergers under regulation are presented to identify the effects of mergers on operating expenses per revnue ton-mile (RTM) and on service terminations at points served by the carriers before they merged. Next, the same factors are studied for the mergers that occurred in the US during the early years of deregulation, but the analyses of these mergers are extended by examining the relative changes in traffic and profits of the surviving carriers. Finally, similar analyses of Canadian acquisitions and mergers occuring since 1978 are undertaken. These time-series and cross-sectional analyses provide evidence regarding the effects of mergers on airline performance, together with evidence on whether postmerger performance has differed under deregulation as opposed to regulation.