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
Date Written: November 29, 2018
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: Suggested Citation