An Event Study of the US Airways-American Airlines Merger

23 Pages Posted: 29 Mar 2019

See all articles by Serdar Dalkir

Serdar Dalkir

CRETC Competition & Regulation Economics Testimony and Consulting LLC

Kevin Hearle

affiliation not provided to SSRN

Date Written: April 4, 2014

Abstract

The recent merger between US Airways and American Airlines was approved by federal and state antitrust authorities, after the merging parties agreed to divest slots and gates at certain “constrained” airports to low cost carriers. By analyzing the stock-market returns of rival airlines, we find some evidence that stock market investors anticipated anticompetitive effects from this merger.

The economics literature offers many reasons why such stock-market event studies should not be used to infer competitive effects from mergers. For example, abnormal returns for rivals might arise for reasons unrelated to competitive harms, such as when a merger changes expectations that one or more rivals will be “in play” (i.e., a potential future acquisition target). However, we argue that, for certain cases and conditions, event studies can inform a competition analysis, and that the US Airways – American merger might well be one such case.

Keywords: horizontal merger, airline mergers, merger probability, abnormal returns, event study

JEL Classification: G14, L41, L93

Suggested Citation

Dalkir, Serdar and Hearle, Kevin, An Event Study of the US Airways-American Airlines Merger (April 4, 2014). Available at SSRN: https://ssrn.com/abstract=3360000 or http://dx.doi.org/10.2139/ssrn.3360000

Serdar Dalkir (Contact Author)

CRETC Competition & Regulation Economics Testimony and Consulting LLC ( email )

DC
United States
202-681-0749 (Phone)

Kevin Hearle

affiliation not provided to SSRN

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
65
Abstract Views
383
rank
419,810
PlumX Metrics