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

1. Map: airports currently served by Southwest and AirTran
2. Domestic system capacity by month 1990--2010
3. Domestic system-wide load factor 1990--2010
4. Domestic system-wide market concentration (HHI) since 1990
5. A decade of growing market shares distinguishes this pairing from the last four major airline mergers
6. Map of airports red-flagged for increases in market concentration due to the proposed merger
7. Southwest fares on monopoly and competitive routes
8. Southwest yields on monopoly and competitive routes

1. With AirTran, Southwest moves to within striking distance of #1 United-Continental in domestic RPMs
2. DOJ's classification of markets by concentration and guidelines for acceptable increases in HHI
3. Red-flagged: proposed merger causes 18 airports to exceed DOJ guidelines for market concentration
4. Red-flagged: 33 routes could draw antitrust scrutiny, including 16 new monopolies

(All tables are also provided in expanded spreadsheet form.)

Price: $995.00

Cambridge Aviation Research is pleased to announce this upcoming report series.

The perceived success of the Delta-Northwest merger has airline executives again eyeing consolidation as a response to the current environment of economic uncertainty, slashed capacity, lowered yields, and renewed security concerns.

Our 2010 Merger Matchup report series will analyze each likely pairing of major U.S. carriers, scoring each potential match by geographic & fleet compatibility, financial health, and potential cost savings. Any overlap markets with antitrust concerns are flagged by comparing pre- and post-merger Herfindahl-Hirschman indices (HHIs) to the market concentration thresholds published by the U.S. Department of Justice and the Federal Trade Commission just-updated Horizontal Merger Guidelines.

We explore these critical issues for each potential merger:

• Geographic and network compatibility. Which airports are likely to lose out as the combined carriers rationalize their networks?
• Fleet harmony. How do the fleets compare from operational, efficiency, and training perspectives?
• Antitrust concerns. Which markets and routes should planners prepare to sacrifice capacity to stave off regulators?

Price: $7,995.00

Quick Take report
Published May 8, 2010
12 pages, 5 figures, 4 tables, 3 electronic spreadsheets

This Quick Take report quantifies the effect of the proposed United-Continental 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" only seventeen airports, and seven routes involving them, for excessive market concentration using the Department of Justice's published guidelines. However, six of the seventeen are in California, which could provide at least a public relations speed bump in what otherwise appears to be a smooth road to approval. Recommendations are offered to airline executives at United-Continental, leaders at red-flagged airports, and executives at other airlines who seek to take advantage of this merger--or one of their own.

Table of Contents

• United & Continental: #1 by Miles, but #3 by Passengers
• Data & Methodology
• Analysis & Results
  • The big picture: how competitive is the domestic system as a whole?
  • Red-flagged: 17 airports which could attract antitrust scrutiny
  • A similar picture at the route level 
• Conclusions & Recommendations
• Appendix: Quantifying Market Concentration with the Herfindahl-Hirschman Index (HHI)

 1. Domestic system capacity by month 2000-2009
 2. Domestic system-wide load factor 2000-2009
 3. Domestic system-wide market concentration (HHI) 2000-2009
 4. Domestic market shares for top U.S. carriers 2000-2009
 5. Map of airports red-flagged for market concentration increases exceeding DOJ guidelines due to the proposed merger.

*1. Combined United-Continental would be the top U.S. carrier by domestic revenue passenger miles (RPMs)
 2. DOJ’s classification of markets by concentration and guidelines for acceptable increases in HHI
*3. Red-flagged: 17 airports exceed DOJ guidelines for market concentration due to proposed UA+CO merger
*4. Red-flagged: the proposed UA+CO merger exceeds the DOJ’s guidelines for market concentration for only 7 routes

*Expanded versions of Tables 1, 3, & 4 are provided as spreadsheets.

Price: $495.00