Thursday, August 22, 2013

US Air American Airlines Merger Blocked, Implications for European Deals

The Justice department has announced that it is suing to block the USAIR-American Airlines, Merger.  We have previously written about the use of concentration ratios to ascertain the competitive impact of a merger involving Annheuser Busch and Modelo.

The arguments for and against are standard.  On the pro-merger side, the combination is expected to lower costs through economies of scale and permit lower pricing for consumers. In addition, since the service routes of the two airlines are complimentary, the merger could provide better linkage for consumers.

On the anti-merger side is the recognition that with increased market share, especially in selected 'hubs', the airlines will be able to charge higher prices with their more monopolistic standing.

In Europe, airline margins are tighter than the US.  In a very interesting article, the CAPA Center for Aviation discusses concentration ratios and margins around the world focusing on the opportunities for additional concentration in Europe.  See European Airlines, Few Deals to be Done.

All the best,


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