Quick Take Report - Southwest's proposed merger with AirTran likely to pass antitrust review
Quick Take report
Published November 10, 2010
18 pages, 8 figures, 4 tables, 4 electronic spreadsheets
This Quick Take report quantifies the effect of the proposed Southwest-AirTran merger on competition in the domestic market at the
industry-, airport-, and route-level.
By computing the Herfindahl-Hirschman Index (HHI) for each overlap
route and market,
we "red flag" 18 airports and 33 routes for excessive market concentration using the
Department of Justice's recently-revised merger guidelines. Primarily due to service overlaps at Baltimore and Orlando, the proposed merger would push 16 routes into monopoly status. As a result of this relatively large increase in monopoly routes, our analysis includes a brief examination of Southwest's pricing practices on its existing monopoly routes. Recommendations are offered for leaders at the affected airports.
Table of Contents
Already #1 by domestic passenger volume, the proposed merger positions Southwest as a close second in RPMs
Data & Methodology
Analysis & Results
The big picture: airline competition at the system level
Red-flagged: 18 airports could attract antitrust scrutiny
33 red-flagged routes, including 16 new monopolies
Southwest: discount monopolist?
Conclusions & Recommendations
Implications for non-overlap airports
Appendix: Quantifying Market Concentration with the Herfindahl-Hirschman Index (HHI)
References
List of Figures
Map: airports currently served by Southwest and AirTran
Domestic system capacity by month 1990--2010
Domestic system-wide load factor 1990--2010
Domestic system-wide market concentration (HHI) since 1990
A decade of growing market shares distinguishes this pairing from the last four major airline mergers
Map of airports red-flagged for increases in market concentration due to the proposed merger
Southwest fares on monopoly and competitive routes
Southwest yields on monopoly and competitive routes
List of Tables
With AirTran, Southwest moves to within striking distance of #1 United-Continental in domestic RPMs
DOJ's classification of markets by concentration and guidelines for acceptable increases in HHI
Red-flagged: proposed merger causes 18 airports to exceed DOJ guidelines for market concentration
Red-flagged: 33 routes could draw antitrust scrutiny, including 16 new monopolies
(All tables are also provided in expanded spreadsheet form.)
Single-copy price: $995 (available for online purchase and download)
Enterprise licensing is available for $4,995 and includes one hour of analyst
inquiry time. Full credit will be given for upgrades from single-copy purchases. Contact sales@cambridge.aero for more details.
Price: $995.00
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we "red flag" 18 airports and 33 routes for excessive market concentration using the
Department of Justice's recently-revised merger guidelines. Primarily due to service overlaps at Baltimore and Orlando, the proposed merger would push 16 routes into monopoly status. As a result of this relatively large increase in monopoly routes, our analysis includes a brief examination of Southwest's pricing practices on its existing monopoly routes. Recommendations are offered for leaders at the affected airports.