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Cost functions and determinants of unit cost effects in horizontal airline M&As

Sveinn Vidar Gudmundsson, Rico Merkert and Renato Redondi

Transportation Research Part A: Policy and Practice, 2017, vol. 103, issue C, 444-454

Abstract: This paper analyses the unit cost effects of mergers and acquisitions (M&As) using linear, quadratic, and translog cost functions. In addition to a basic unit cost model we specify separate models for distress, profit, relative size, and cost difference, among the merging firms. We use a sample of 19 horizontal M&As in the international airline industry and data spanning from 1980 to 2012. Our models show that M&As do not affect unit costs in a significant way, unless the relative size difference of the merging firms is large, in which case we detect an increase in unit costs.

Keywords: Cost analysis; Efficiencies; Airlines; Mergers and acquisition; Unit costs; Cost functions (search for similar items in EconPapers)
Date: 2017
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