Pan American to United: The Pacific Division Transfer Case

Franklin M. Fisher

RAND Journal of Economics, 1987, vol. 18, issue 4, 492-508

Abstract: Airline deregulation has brought a wave of airline mergers, approved by the Departments of Transportation (DOT). Where markets are truly contestable, approving mergers makes sense. Where entry is difficult, however, detailed analysis is required. United Airlines' acquisition of Pan American's Pacific Division was a case that involved high entry barriers and high concentration. Approval made it likely that price competition would cease. While the acquisition undoubtedly brought efficiencies, disapproval of the merger would have produced those efficiencies in a less restrictive way. DOT took a very narrow view of its regulatory responsibilities in approving the acquisition.

Date: 1987
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