Reassessing Common Ownership: Corrections to Azar, Schmalz, and Tecu (2018)

Abstract

Azar, Schmalz, and Tecu (2018, “AST”) purport to show a positive relationship between ticket prices and common ownership in the U.S. airline industry. We replicate AST’s results and show that their conclusion is a result of incorrect and unsubstantiated assumptions about:

(1) financial incentives of asset managers,

(2) corporate control and financial incentives during bankruptcy, and

(3) changes in industry structure over time.

After correcting any one of these flawed assumptions, we conclude there is no statistically significant association between ticket prices and common ownership.

Keywords: Common Ownership, Airlines, Competition, Asset Managers

JEL Classification: G30, G34, G38, G23