AIRLINE MERGERS: A LONGER VIEW

This paper presents a long-run analysis of three airline mergers. The merger in July 1986 between Northwest Airlines (NW) and Republic Airlines (RC) involved many routes from Minneapolis-St. Paul International Airport, which was a hub for both carriers. Trans World Airlines (TW) and Ozark Air Lines (OZ) shared a hub at St. Louis International Airport and merged in September 1986. This study examines those two mergers and the merger between USAir (US) and Piedmont Aviation (PI) that occurred in October 1987. In contrast to short-run studies that compare relative fares from a year before to a year after a merger, this paper examines relative fares and route competition for several years before and after the mergers. This captures trends that preceded the mergers as well as effects of the mergers that take longer than a year to materialize. The results, which need to be interpreted with caution, suggest that the effects of some mergers are benign while others can lead to significant fare increases.