Lost bags, flight delays, and reservation headaches are often blamed on airline mergers and the perceived inefficiencies in consolidation. However, a recent study on effect of airline mergers on on-time performance may change your opinion.
The analysis of 15 years of U.S. Department of Transportation statistics found that airline consolidation has had little negative impact on on-time performance.
In fact, two Indiana University researchers found evidence that mergers lead to long-term improvements, likely due to improved efficiencies.
They analyzed on-time performance for five major airline mergers since 2000, including American Airlines’ acquisition of Trans World Airlines in 2001; America West’s acquisition of U.S. Airways in 2005; Delta Airlines’ merger with Northwest Airlines in 2008; United Airlines’ merger with Continental Airlines in 2010; and Southwest Airlines’ acquisition of Airtran Airways in 2011.
Authors Jeffrey Prince and Daniel Simon used three years of data prior to each merger and then up to five years of data afterward. The researchers compared the data from merged airlines with a control group represented by the merging carriers’ rivals to better identify the impact of mergers of airline service quality. The researchers focused on activity on the 10th, 15th and 20th of each month due to the large dataset at hand.
“Further analysis reveals that we find the biggest improvement in on-time performance in the long-run, post-merger period on some of the routes where we would expect merger effects to be most pronounced, routes that both carriers served prior to merging,” they said. “These routes offer the greatest opportunities for efficiencies, including consolidation of operations on the ground and in the air, and the internalization of congestion externalities.”
Their study also found no evidence that rival air carriers’ on-time performance was negatively affected by the merger of two airlines. The data, however, did provide some tentative evidence that improvements in efficiency at merged airlines may also be matched by competitors on routes that the merging carriers previously served.
In summary, the researchers found that airline mergers do not harm consumers. Instead, mergers may ultimately benefit consumers as they receive enhanced service quality through improved on-time performance, particularly a few years after the merger.
The study is published in the Journal of Industrial Economics.
(With inputs from ANI)