Study suggests that airline mergers can improve customer satisfaction

A new study in the Journal of Consumer Affairs provides evidence that airline mergers can improve consumers’ perceptions of services.

The research examined the merger between United Airlines and Continental Airlines, which was agreed to in 2010 and completed in 2012. (The merger retained the United Airlines name.)

“Most research concerning mergers and acquisitions are managerial and leaned toward marketing strategy of top managers or decision makers. The main focus has been on the role of mergers in companies’ profitability and growth,” said study author Peter Andersen, an assistant professor of marketing at the University of Scranton.

“However, as behavioral scientists, our main interest was the impact of forming a merger between two airlines on the perception and value assessment of consumers. It is important for managers to understand how their decisions to integrate their operations with another firm can improve service quality and customer satisfaction, which in turn, will lead to a better corporate image and increase in sales.”

“Therefore, we tried to conduct an empirical study by surveying passengers in two phases – before and after the formation of an airline merger.”

Prior to the merger, United Airlines was rated as having the worst customer satisfaction among US airlines, while Continental Airlines was rated as second best. The researchers found that the biggest differences in service quality between United Airlines and Continental Airlines before the merger was related to ground services, such as check-ins, the boarding processes, and baggage handling.

In the first three years of post‐merger United Airlines, Andersen and his colleague observed an increase in customer satisfaction, which was associated with an improvement in the level of service quality.

The findings were based on 186 passengers who were surveyed between 2011 and 2015 while traveling through three airports in the United States. Sixty-three passengers were surveyed from the pre-merger United Airlines, 63 passengers from Continental Airlines, and 60 passengers from the post-merger United Airlines.

“The result of such study is mainly useful for managers who need to make strategic decisions regarding mergers,” Andersen told PsyPost.

“However, consumers and industry experts may also be interested in realizing how a merger can help the company improve the quality of its services through synergy. Of course, a successful merger will be the one in which at least one firm has a better reputation for quality services, or if both firms have some strengths and resources that enable the merger to achieve greater performance and better satisfaction ratings.”

The study — like all research — has some limitations. In particular, the researchers noted that the study would have benefitted from a larger sample of airline passengers.

“The previous experience of mergers in auto industry has shown that many mergers failed because of cultural difference between the managers or employees of the two firms. However, this issue arises only if the two companies belong to different countries,” Andersen noted.

“As our study was about domestic airlines, such a threat may not be relevant. Nevertheless, researchers may be interested in studying what will happen if two airlines from different countries decide to form a merger. For example, how about if Air Asia, which is the most successful low-cost airline in the world forms a merger with an American firm such as Southwest or JetBlue?”

Andersen also said there was a need for more practical research on issues like business mergers.

“I would like to invite my academic colleagues around the world to expand their research from merely theoretical frameworks to more practical areas. Although developing theories and models is a critical role of research, we need to have insights for managers and decision makers,” he explained.

“Marketing is a profession that relies on managerial art, marketing science, and technology. So, we should apply scientific methods to create objective explanations helpful in making better managerial decisions.”

The study, “The Effects of Airline Mergers on Consumers’ Perceptions of Services and Behavioral Responses“, was authored by Peter Andersen and Fei L. Weisstein.