Cost and revenue synergies in airline mergers : Examining geographical differences

Item Type Journal paper
Abstract

Deregulation, privatization and shifting demand patterns in the airline industry, combined with the emergence of low-cost airlines and rising fuel prices have increased the competitive pressure on legacy airlines. Since alliances do not deliver sufficient benefits to counterbalance these trends, many airlines have engaged in mergers to seek for additional cost and revenue synergies. An extent body of literature investigates the synergy potential in mergers and alliances, but there is no study on how synergies differ among mergers and what potential influence factors cause these differences. This paper aims at explaining differences in synergy estimates and realized synergies in recent airline mergers and places a special focus on geographical influence factors.
The research methodology uses a comparative case study comprising six large airline mergers between 2003 and 2012 from Europe, North America and Latin America. After analyzing the cases individually, the pre-merger situation of the merging airlines, the synergy estimates and the realized synergies of the cases were compared.
The results show considerable geographical differences in pre-merger cost structures, synergy estimates, and synergy realization. The European mergers present lower synergy estimates but also lower integration costs than mergers in the Americas. Whereas European airlines estimate cost synergies higher than revenue synergies, both North and Latin American airlines expect more revenue synergies than cost synergies from airline mergers. Only one merger showed superior post-merger profitability which indicates that the achieved synergies in the broad majority of the cases are insignificant.

Authors Schosser, Maximilian & Wittmer, Andreas
Journal or Publication Title Journal of Air Transport Management
Language English
Keywords Airline merger, mergers & acquisitions, synergies, cost synergies, revenue synergies
Subjects business studies
HSG Classification contribution to scientific community
Refereed Yes
Date 1 August 2015
Publisher Elsevier
Place of Publication Amsterdam
Volume 47
Page Range 142-153
Number of Pages 12
ISSN 0969-6997
ISSN-Digital 1873-2089
Publisher DOI 10.1016/j.jairtraman.2015.05.004
Depositing User Laura-Virginia Birrer
Date Deposited 11 Sep 2015 15:14
Last Modified 23 Aug 2016 11:22
URI: https://www.alexandria.unisg.ch/publications/243846

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Citation

Schosser, Maximilian & Wittmer, Andreas (2015) Cost and revenue synergies in airline mergers : Examining geographical differences. Journal of Air Transport Management, 47 142-153. ISSN 0969-6997

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https://www.alexandria.unisg.ch/id/eprint/243846
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