Working Papers
Merger Effects of Low-Cost Carriers’ Merger [Job market paper]
This study investigates the effects of the merger between two low-cost carriers, Southwest Airlines and AirTran Airways, focusing on overlapping routes. To control factors that could affect the outcomes, two-way fixed effects difference-in-differences regressions are used on outcomes at the market-carrier-level. The results suggest that changes in price are about 5-6% higher for merging airlines than for non-merging airlines, and there is no evidence of a relative increase in the quality of the merging airlines on the direct overlapping routes. These findings are also supported by an alternative estimation method, synthetic difference-in-differences. Unlike the small price effects of merger between legacy carriers, this merger between low-cost carriers appears to have significant anti-competitive effects on overlapping routes.
Effects of Codeshare Exit: Evidence from the Merger of Alaska Airlines and Virgin America
– with Rihyun Park
In 2016, Alaska Airlines acquired Virgin America. When approving the transaction, the Department of Justice required Alaska Airlines to significantly scale back its codeshare lines with American Airlines so as to ensure head-to-head competition. This paper analyzes price changes before and after the merger and the effects of codeshare cessation on prices and demand. The findings indicate that the cessation of the codeshare lines between Alaska and American worked to reduce prices on the relevant markets. However, the results from demand estimation indicate relative decreases in demand for products on the routes where Alaska and American ceased their codeshare products, making it challenging to derive clear welfare implications.