Strategic fit of mergers and acquisitions in Latin American airlines: a two-stage DEA approach

Peter Wanke, Jorge Antunes, Henrique Correa, Aaron Tan

Research output: Contribution to journalArticlepeer-review

4 Citations (Scopus)


Purpose: The purpose of this paper is to assess the efficiency determinants of mergers and acquisitions (M&A) in the context of Latin American airlines based on business-related variables commonly found in the literature. The idea is to identify preferable potential airline matches in light of fleet mix, ownership structure and geographical proximity. Design/methodology/approach: In order to achieve the objective, all possible combinations of M&A pairs are considered in the analysis, which is developed in a two-stage approach. First, the M&A Data Envelopment Analysis model efficiency and returns-to-scale estimates are computed. Then, robust regression and multinomial logistic regression are respectively used to discriminate these estimates in terms of such business-related variables. Findings: The results reveal that these different contextual variables significantly impact virtual efficiency and returns-to-scale levels. Private ownership, passenger focus and a better match between aircraft size and demand for flights appear to be key drivers for merged airline efficiency. Research limitations/implications: The study makes theoretical contributions, though limited to analyzing Latin American airlines only. The use of bootstrapped robust/multinominal logistic regression, compared to the methods adopted by previous literature studies, generates more accurate and robust results related to the efficiency drivers due to its special feature and ability to allow the discrimination of increasing, decreasing, and constant returns to scale in light of a given set of contextual variables. Practical implications: This study examines the pure effect of the merging activity on efficiency gains. Not only private ownership but also a hybrid public–private ownership has a positive influence on virtual efficiency, suggesting an important governmental role in promoting M&A in the airline industry. Originality/value: The authors present an original take on the issue of airline mergers by exploring what are the major drivers possibly involved in efficiency gains of potentially merged (virtual) airlines. The authors identify preferable potential airline matches where efficiency gains would be positive in light of business-related variables such as fleet mix, ownership structure and geographical proximity. The analysis also includes an assessment of the impact of contextual variables such as cargo type, ownership structure and geographical proximity in relation to the strategic fit of mergers considering the resulting efficiency and returns-to-scale scores of virtually merged airlines. To the authors’ knowledge, no previous research has addressed these issues in Latin American airlines. Further research directions for this industry are also discussed.

Original languageEnglish
Pages (from-to)1513-1545
Number of pages33
Issue number5
Early online date10 Aug 2021
Publication statusPublished - 26 Apr 2022


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