Abstract
Most of the major airlines have been expanding their service network via airline strategic alliances with other small airlines to form a global service network. Since last two decades, due to this mergers airline industry is undergoing unprecedented changes. This paper explores the airlines’ mergers and how they impact the aviation industry. The employees in the aviation industry, customer’s satisfaction, their views on mergers, and labor protective provision are some of the topics that will be discussed. Another focus is whether airline mergers really helpful for the economic growth of the aviation industry.
Introduction
The aviation industry is one of the most efficient and unique industry which provide the most reliable mode …show more content…
Since 1978, after the Airline Deregulation Act was passed by the US Congress most of the major US based Air Carriers had gone bankrupt and their operations were ceased by the government. Most of the carriers in the US had declared bankruptcy in between 1990 and 2010, but one the most recent cases of bankruptcy filed by American Airline in 2013 and its merger with the US Airways had led to mega merger in Aviation Industry. This made it more financially stable. The three largest US major carriers known as legacy airlines- American Airlines, United Airlines and Delta Airlines make’s up approximately 47% of the domestic aviation market. Even these airlines are affiliated with global airline alliances making approximately 77% of the global market according to Department of Transportation (DOT). After declaring bankruptcy most of the small airlines merged successfully with these major US carriers. Mergers between airlines have drawn sharp criticism from the airlines’ customers and led to fierce debate among economists. The customers are worried that mergers among major airlines …show more content…
Prices
Huschelrath and Muller studied the consumer welfare effects of mergers in airline networks. They investigated the price effects after the merger completed in 2005 between American West Airlines and US Airways. They found out that after two years of merger completion, merger led to 6.4% higher prices than observed on the comparator routes over same time frame. Since 2004, airfare had climbed steadily. Most of the airlines have increased 15% of their airfare after the mergers instead of going down. Airfares for shorter routes (500 miles) have increased to $160 in 2013 from $116 in 2000. Flights between 500 and 1,500 miles, airfares have increased to $191 from $177 in that period, and to $236 from $226 for long-haul flights of 1,000 to 2,499 miles, according to the U.S. Department of Transportation (DOT) statistics adjusted for inflation. Airlines even charges for baggage as $50 per bag. In 2013, American airlines had collected more than $780 million on baggage fees, $140 million more than Delta Airlines. Due to mergers competition in aviation industry has gone down which allows airlines to make more and more profit by charging high and unnecessary
Most of the major airlines have been expanding their service network via airline strategic alliances with other small airlines to form a global service network. Since last two decades, due to this mergers airline industry is undergoing unprecedented changes. This paper explores the airlines’ mergers and how they impact the aviation industry. The employees in the aviation industry, customer’s satisfaction, their views on mergers, and labor protective provision are some of the topics that will be discussed. Another focus is whether airline mergers really helpful for the economic growth of the aviation industry.
Introduction
The aviation industry is one of the most efficient and unique industry which provide the most reliable mode …show more content…
Since 1978, after the Airline Deregulation Act was passed by the US Congress most of the major US based Air Carriers had gone bankrupt and their operations were ceased by the government. Most of the carriers in the US had declared bankruptcy in between 1990 and 2010, but one the most recent cases of bankruptcy filed by American Airline in 2013 and its merger with the US Airways had led to mega merger in Aviation Industry. This made it more financially stable. The three largest US major carriers known as legacy airlines- American Airlines, United Airlines and Delta Airlines make’s up approximately 47% of the domestic aviation market. Even these airlines are affiliated with global airline alliances making approximately 77% of the global market according to Department of Transportation (DOT). After declaring bankruptcy most of the small airlines merged successfully with these major US carriers. Mergers between airlines have drawn sharp criticism from the airlines’ customers and led to fierce debate among economists. The customers are worried that mergers among major airlines …show more content…
Prices
Huschelrath and Muller studied the consumer welfare effects of mergers in airline networks. They investigated the price effects after the merger completed in 2005 between American West Airlines and US Airways. They found out that after two years of merger completion, merger led to 6.4% higher prices than observed on the comparator routes over same time frame. Since 2004, airfare had climbed steadily. Most of the airlines have increased 15% of their airfare after the mergers instead of going down. Airfares for shorter routes (500 miles) have increased to $160 in 2013 from $116 in 2000. Flights between 500 and 1,500 miles, airfares have increased to $191 from $177 in that period, and to $236 from $226 for long-haul flights of 1,000 to 2,499 miles, according to the U.S. Department of Transportation (DOT) statistics adjusted for inflation. Airlines even charges for baggage as $50 per bag. In 2013, American airlines had collected more than $780 million on baggage fees, $140 million more than Delta Airlines. Due to mergers competition in aviation industry has gone down which allows airlines to make more and more profit by charging high and unnecessary