An Airline Merger and its Remedies: JAL-JAS of 2002

Author Name DOI Naoshi (Sapporo Gakuin University) / OHASHI Hiroshi (Faculty Fellow, RIETI)
Creation Date/NO. August 2015 15-E-100
Research Project Globalization, Innovation, and Competition Policy
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This paper investigates the economic impacts of the merger between Japan Airlines (JAL) and Japan Air System (JAS) in October 2002 and its remedial measures. This paper performs simulation analyses using an estimated structural model in which airlines set both fares and flight frequencies on each route in the domestic market. By comparing supply models, the hypothesis that the merger caused a collusion among airlines is rejected. The marginal-cost estimates for the merging airlines significantly declined primarily through the expansion of its domestic network. The simulation estimates suggest that, although the merger increased the total social surplus for all domestic routes by 6.8%, it increased fares and decreased consumer surplus on the JAL-JAS duopoly routes. This paper also evaluates remedial measures associated with the merger.

Published: Doi, Naoshi, and Hiroshi Ohashi, 2019. "Market structure and product quality: A study of the 2002 Japanese airline merger," International Journal of Industrial Organization, Vol. 62, pp. 158-193