Post-merger changes in flight frequency for network and low-cost carriers

Abstract

The inventory reallocation between strategic groups is analysed after occurrence of horizontal mergers with little or no overlapping market, to reveal how players in a strategic group create, capture and raise their own, and lower others' value through cooperatively and non-cooperatively interdependent deterrence tactics. The scope is three US airline mergers occurring in 2011, 2013 and 2016. The real-time longitudinal population data was collected to analyse the causal impact of mergers on inventory (i.e., flight frequency as defined in this paper). Then, the industry's flight frequency fluctuations between strategic groups were studied. Our findings show that after mergers, there is little change on the aggregate industry inventory levels. However, a significant inventory reduction in markets where only one strategic group serves, and an obvious build-up in markets where two strategic groups compete with one group focusing on mobility barriers and the other on mutual forbearance.