An Ex Post Analysis of the US Airways/American Airlines Merger

Abstract

This paper investigates the price and output effects of the US Airways and American Airlines merger in markets in which actual or potential competition was eliminated. In markets in which actual competition was eliminated, the results are mixed. The merger is procompetitive (lower prices and higher output) in nonstop markets in which both endpoints are major hubs of merging airlines, but anticompetitive in connecting markets. Where potential competition was eliminated, the results are consistent with significant price increases and output reductions, particularly when the potential competitor was US Airways.