Cost Functions and Determinants of Unit Cost Effects in Horizontal Airline M&As
Forthcoming, Transportation Research A
37 Pages Posted: 16 Feb 2017
Date Written: January 1, 2017
This paper analyses the unit cost effects of mergers and acquisitions (M&As) using linear, quadratic, and translog cost functions. In addition to a basic unit cost model we specify separate models for distress, profit, relative size, and cost difference, among the merging firms. We use a sample of 19 horizontal M&As in the international airline industry and data spanning from 1980-2012. Our models show that M&As do not affect unit costs in a significant way, unless the relative size difference of the merging firms is large, in which case we detect an increase in unit costs.
Keywords: Unit cost effects, M&A, mergers,airlines, cost functions, horizontal mergers
JEL Classification: L1, L4, L93
Suggested Citation: Suggested Citation