Merger North West Airline and Republic Airlines

Merger North West Airline and Republic Airlines

  • Submitted By: walters
  • Date Submitted: 03/10/2009 6:57 AM
  • Category: Business
  • Words: 2861
  • Page: 12
  • Views: 540

An American giant is born:
The Northwest Airline and Republic Airline Merger

Table of contents

1. Introduction……………………………………………………………………………2
2. Market power and the airline market ......…………………………………….……..2
2.1 Market power
2.2 The airline industry in the U.S.
3. Analysis of the Department of Justice (OJ) decision……………………………...4
3.1 Regulation policy
3.2 Barriers of entry
3.3 The limit pricing model
4. Conclusion……………………………………………………………………………..8

1. Introduction
Humanity was always fascinated by the idea to fly like a bird and the first idea of an aircraft came up in China. 1910 the dream became reality and the first proper monocoque was invented in the U.S. The construction gave the basic idea to develop aircrafts which could be used as transportation unit (Brueckner, 1992). Few constructions have changed the world and people´s life as much as the invention of the aircraft. For a long period of time, air traffic became a part of our daily life. The airline industry certainly has experienced technological progress over the years and nowadays it became one of the safest and fastest means of transportation in the world. From the beginning, air traffic in the US was highly regulated by the government to protect local airlines from excessive competition pressure (Brueckner, 1992). However in 1982 the congress resolved on the Airline Regulation Act and the following enhanced competition forced airways into a higher concentration (Gomez-Ibanez, 1986). During the merger and acquisition wave Northwest Airlines and Republic Airlines, two of the dominant airlines in the United States, merged in 1986 (Borenstein, 1990). Although the executive authority allowed the merger, a dominant market position of Northwest airline and an increase in its market power among customers and competitors turned out to be the result.

In order to prove anticompetitive manner and understand the judgment of the admission, the key idea which has to be understood is market...

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