Privatization and Efficiency: Industry Effects of the Sale of British Airways
24 Pages Posted: 11 Jul 2011
Date Written: February 1, 1997
We analyze the effect of privatization on the performance of British Airways by examining the privatization's impact on airfares and competitors' stock prices. We find that stock prices of U.S. competitors fell a significant 7% upon British Airways' privatization, implying expectation of a more competitive British Airways. Closer rivals of British Airways experienced a greater drop in stock price than more distant rivals. Further, airfares in markets served by British Airways fell significantly upon privatization. The results suggest that a change from government to private ownership improves economic efficiency.
Keywords: Privatization, Ownership, Airlines, British Airways
JEL Classification: G32, L33, G38, L93
Suggested Citation: Suggested Citation