Mergers and Product Quality: A Silver Lining from De-Hubbing in the U.S. Airline Industry

Forthcoming: Contemporary Economic Policy

37 Pages Posted: 27 Jan 2016 Last revised: 1 Dec 2018

See all articles by Nicholas G. Rupp

Nicholas G. Rupp

East Carolina University - Department of Economics

Kerry M. Tan

Loyola University Maryland

Date Written: November 29, 2018

Abstract

This paper investigates how de-hubbing, which occurs when an airline ceases hub operations, impacts product quality. Examining four cases of de-hubbing following U.S. airline mergers between 1998 and 2016, we analyze three product quality measures: on-time performance, travel time, and flight cancellations. In order to isolate a merger's impact on product quality, we compare the results of four de-hubbing events that followed a merger with three de-hubbing cases that occurred independently of a merger. We find a silver lining from mergers since product quality improvements are isolated to de-hubbing events which follow airline mergers rather than non-merger induced de-hubbing.

Keywords: De-Hubbing, Product Quality, Legacy Carriers, Hub-and-Spoke Network, Airline Competition

JEL Classification: L15, L93

Suggested Citation

Rupp, Nicholas G. and Tan, Kerry M., Mergers and Product Quality: A Silver Lining from De-Hubbing in the U.S. Airline Industry (November 29, 2018). Forthcoming: Contemporary Economic Policy. Available at SSRN: https://ssrn.com/abstract=2722782 or http://dx.doi.org/10.2139/ssrn.2722782

Nicholas G. Rupp

East Carolina University - Department of Economics ( email )

Brewster Building
Greenville, NC 27858
United States
252.328.6821 (Phone)
252.328.6743 (Fax)

HOME PAGE: http://myweb.ecu.edu/ruppn/

Kerry M. Tan (Contact Author)

Loyola University Maryland ( email )

4501 N. Charles Street
Sellinger Hall 321
Baltimore, MD 21210
United States
(410)617-2460 (Phone)

HOME PAGE: http://evergreen.loyola.edu/~kmtan/

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