Mergers and Business Model Assimilation: Evidence from Low-Cost Airlines Takeovers

Paul W. Dobson () and Claudio Piga ()

Discussion Paper Series from Department of Economics, Loughborough University

Abstract: This paper examines mergers that lead to an almost immediate replacement of the target firm’s business model in favor of that of the acquiring firm. We examine the post-merger behavior of the two leading European dedicated low-cost airlines, EasyJet and Ryanair, each acquiring another low-cost airline, respectively Go Fly and Buzz. We find that both takeovers had an immediate and sustained impact on both the pricing structures and the extent of inter-temporal price schedules used on the acquired routes, with early booking fares noticeably reduced and only very late booking fares increased. The analysis suggests that the takeovers had a net beneficial effect as a consequence of the introduction of the acquiring firms’ business models and associated yield management pricing systems. .

Keywords: merger policy; Business model; Low-cost airline; Price discrimination; Yield management . (search for similar items in EconPapers)
JEL-codes: L11 L13 L93 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-com and nep-ind
Date: Written
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Persistent link: http://EconPapers.repec.org/RePEc:lbo:lbowps:2009_2

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