Mergers and acquisitions in aviation – Management and economic perspectives on the size of airlines

Mergers and acquisitions in aviation – Management and economic perspectives on the size of airlines

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Article ID: iaor20123538
Volume: 48
Issue: 4
Start Page Number: 853
End Page Number: 862
Publication Date: Jul 2012
Journal: Transportation Research Part E
Authors: ,
Keywords: management, statistics: data envelopment analysis, economics
Abstract:

This paper reviews literature and management perspectives on airline mergers and acquisitions. We find that M&A/consolidation is seen as a ‘game‐changer’ and mandatory to survive in aviation markets. We, therefore, apply DEA models to 66 airlines to evaluate whether big is indeed always beautiful. Our results suggest that the optimal airline size is between 34 and 52bn available seat kilometre capacity and that airlines with more than 200bn ASK are definitely too large to operate efficiently. This also applies when revenues are included in the DEA models, which is central as yield management and ancillary revenues are increasingly important.

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