European airline merger, alliance consolidation, and consumer welfare

European airline merger, alliance consolidation, and consumer welfare

Journal: Air Transport Management

Author: Jan K. Brueckner
, Eric Pels

Published: 2005

Abstract

This paper explores the effects of a European airline merger followed by a consolidation of two competing international alliances. The exercise has been inspired by the Air France–KLM merger, which is expected to spur consolidation of the Northwest–KLM and Sky Team alliances into a single mega-alliance. The results of the analysis showthat, although the airlines benefit through higher profits, the merger and alliance consolidation harm consumers while reducing overall social surplus. The reason for this negative outcome is that, as modeled, all the effects of the merger and alliance consolidation are anticompetitive.

Keywords: Merger; Alliance; Competition

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