U.S. airline mergers’ performance and productivity change

The U.S. airline industry has experienced waves of entries and mergers since 1978. The three waves of mergers in the U.S. airline industry happened in the 1980s, 1990s, and late 2000s. We study the performance of U.S. airlines and the influence of recent mergers on the efficiency of airlines. A two-stage radial network data envelopment analysis is proposed to estimate overall efficiencies, stage efficiencies and productivity change for the U.S. airlines. The overall efficiency of U.S. airlines is decomposed as the product of production efficiency and consumption efficiency. Results show the overall efficiencies of merged airlines improved after the merger. The improvement is more significant for network carriers compared to low-cost carriers, and network carriers have a higher consumption efficiency relative to low-cost carriers. The Malmquist indices indicate that merged airlines are influenced by both technical change and production change. The efficiency changes of airlines improved in the post-merger years.