Multimarket Contact and Mergers and Acquisitions: The Cases of Southwest Airlines and Airtran Airways in the US Airline Industry

Ryota Asahi

Multimarket Contact and Mergers and Acquisitions: The Cases of Southwest Airlines and Airtran Airways in the US Airline Industry

Ryota Asahi * §

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§ Fukuyama Heisei University

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Abstract

Many studies have empirically shown that multimarket contact (MMC) has collusive effects in the US airline industry. The US airline industry has recently undergone large changes. For example, some airlines have implemented mergers and acquisitions (M&A), while Low-cost carriers (LCCs) have matured over time and developed according to multiple business models. Few previous empirical studies of MMC have taken these changes into account. Thus, this paper analyzes the impact of M&A on the effects of MMC while taking into consideration the presence of LCCs. We focus on Southwest’s “acquisition of Airtran Airways and estimate the simultaneous demand and price equations using unbalanced panel data for the fourth quarters of 2009, 2010, 2011, 2012, 2013 and 2014. We madethree findings. First, MMC has collusive effects on airlines’ pricing in the US airline industry. Second, the effect of MMC on Southwest Airlines’ pricing did not increase after the acquisition of Airtran Airways. Third, Southwest Airlines’ rivals may show more collusive effects of MMC after an acquisition is made by Southwest Airlines.

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Funding

No external funding was declared for this work.

Conflict of Interest

The authors declare no conflict of interest.

Ethical Approval

No ethics committee approval was required for this article type.

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Not applicable for this article.

How to Cite This Article

Ryota Asahi. 2017. "Multimarket Contact and Mergers and Acquisitions: The Cases of Southwest Airlines and Airtran Airways in the US Airline Industry". Global Journal of Management and Business Research - A: Administration & Management GJMBR-A Volume 17 (GJMBR Volume 17 Issue A1).

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GJMBR Volume 17 Issue A1

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Journal Specifications

Crossref Journal DOI 10.17406/GJMBR

Print ISSN 0975-5853

e-ISSN 2249-4588

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Classification

GJMBR-A Classification JEL Code: M00

Submission ReceivedDecember 11, 2016
Peer Review Double Blind
Handling Editor
Accepted January 1, 2017
Published January 15, 2017

Version of record

v1.2

Issue date

March 7, 2017

Language

English

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Total Score: 193

Country: Japan

Subject: Global Journal of Management and Business Research

Authors: Ryota Asahi (PhD/Dr. count: 0)

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