MERGERS AND PRODUCT QUALITY: A SILVER LINING FROM DE‐HUBBING IN THE U.S. AIRLINE INDUSTRY

Nicholas Rupp and Kerry M. Tan

Contemporary Economic Policy, 2019, vol. 37, issue 4, 652-672

Abstract: This paper investigates how de‐hubbing, which occurs when an airline ceases hub operations, impacts product quality. Examining four cases of de‐hubbing following U.S. airline mergers between 1998 and 2016, we analyze three product quality measures: on‐time performance, travel time, and flight cancellations. In order to isolate a merger's impact on product quality, we compare the results of four de‐hubbing events that followed a merger with three de‐hubbing cases that occurred independently of a merger. We find a silver lining from mergers because product quality improvements are isolated to de‐hubbing events which follow airline mergers rather than nonmerger‐induced de‐hubbing. (JEL L15, L93)

Date: 2019
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