EC's methodology in Ryanair/Aer Lingus applied to Jetblue/Spirit: a review of merger analysis in airline markets

Pinent Sans, Immaculada; Freixa Martínez, Joan

EC's methodology in Ryanair/Aer Lingus applied to Jetblue/Spirit: a review of merger analysis in airline markets

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Citació

Pinent Sans, I, Freixa Martínez, J. EC's methodology in Ryanair/Aer Lingus applied to Jetblue/Spirit: a review of merger analysis in airline markets. 2023. handle: http://hdl.handle.net/10230/58385

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Resum

In 2007 the European Commision (EC) prohibited Ryanair’s acquisition of Aer Lingus after an extensive analysis that indicated that the merger would be detrimental to consumers. To support their arguments, the EC included a regression analysis that showed that prices were expected to rise after the transaction. We showed the limitations of this analysis by applying it to the Jetblue/Spirit merger case in the US. We found that this approach has important endogeneity concerns that largely limit the conclusions that can be drawn from the results. We propose a solution through the use of appropriate instrumental variables for supply.