milestone-ga

Milestone three 3 ( PAGES)– U.S. AIRWAYS & AMERICAN AIRLINES MERGER PROJECT:

 

The central focus of ECON 540 is the U.S. Airways & American Airlines merger. Most of the points available in the course come from a project concerned with the analysis of this merger. Since so much of your grade is dependent on this project and since the course instructions are so vague, I have created this guide to help you out!

 

I. The first thing you will want to do is download both assignment descriptions. These are accessible through “Course Information” then through the folder “Assignment Guidelines and Rubrics”, then “Final Project Part One”, then all the way at the bottom you’ll find “Final Project Document One”. The other is available by similar steps through “Final Project Part Two”, then all the way at the bottom you’ll find “Final Project Document Two”. Read both of these documents thoroughly before you do anything else. 

 

 

The second thing you will want to do—if you have not already—is download the ‘merger document’. There is a hyperlink to it on the “Econ 540 Final Project Part One Guidelines and Rubric’’ pdf. This is accessible through “Course Information” then through the folder “Assignment Guidelines and Rubrics”, then “Final Project Part One”, then all the way at the bottom you’ll find “Final Project Document One”.

 

Or you can click here:

 

http://online.wsj.com/public/resources/documents/airlinescomplaint0813.pdf

 

Please review the merger document to get a sense of the context. You’ll notice at the very end of the document you can find a table of city-pair, post merger HHI, and the change in HHI. I would recommend copy/pasting this information into Excel.

 

You will also want to download the following resources:

 

TranStats Data (For HHI)  http://www.transtats.bts.gov/DL_SelectFields.asp?Table_ID=310&DB_Short_Name=Air%20Carriers

 

GAO Document: http://www.gao.gov/assets/660/655314.pdf

 

Flight Stats Data:  http://www.flightstats.com/go/Home/home.do;jsessionid=9A69E0687D38408EA4FAC009C5374BD4.web4:8009

 

 

II. Now for the assignment specifics. The assignment is divided into two portions, Part I and Part II. There are several components for each.

 

Final Project Part One 

Students must complete a case study briefing document that focuses on a case study based upon the American Airlines and US Airways merger as the first final project. Students will submit the briefing document, which focuses on this merger from the perspective of either American Airlines or US Airways, in Module Six. Within this document, students will address which models from this course are applicable to this study and calculate several ratios surrounding market power, applying game theory concepts from this course. 

Final Project Part Two 

Students must complete a regulatory analytical paper as their second final project. This analytical paper, written from the position of a government regulator who is looking at this merger to identify any potential market distortion and what might be done to mitigate the impact on consumers or competitors, will be submitted in Module Ten. The project has one milestone. 

 

Part One, Milestone One: Due with Module 2.

 

This is easy. Here you’re just submitting 2-3 pages of the historical background/context for the merger.

 

Part One, Milestone Two: Due with Module 4.

 

This is more difficult, but still pretty easy. Here you’re analyzing static and dynamic (sequential timing) game theory models relevant for the merger. You must also incorporate an analysis of the opportunities to profit maximize. You’ll write 3-4 pages and include matrices/game trees.

 

Part One, Milestone Three: Due with Module 5.

 

This is computationally difficult. Think first, then work. You need to calculate the HHI before and after the merger, as well as the change. You’ll write 1-2 pages. The HHI calculation is difficult because it includes every airline company in the United States.

Computing the industry HHI is a three-step process: 

1. Get the 2013 Bureau of Transportation Statistics (BTS) data using these settings/filters: Geography, All, Year, 2013, Period, All. Then check these fields: Passengers, Distance, UniqueCarrier, UniqueCarrierName. 

2. Unzip the download file and load the csv file. Compute passenger-miles by multiplying passengers times distance. 

3. Sum up all the passenger miles by airline. 

On April 10, 2014, this query returned 186,290 rows (counting headers). The number of unique airlines was 125. Check that the computed market share (each airline's passenger-miles divided by the total) for each of the major airlines matches the column chart on the BTS home page. 

If these steps fail, I recommend taking data from the city-pair/HHI found at the end of the merger document. 

Part One, Final: Due with Module 6.

 

This is pretty easy. Here you’ll just combine the previous parts and update for a finished version. You’ll want to correct any deficiencies that I call your attention to on prior submissions. Full APA citations, (and in-text citations), etc.

 

Part Two, Milestone One, Due with Module 8.

 

VERY DIFFICULT. THINK FIRST, THEN WORK. I’m 100% serious when I say ‘think first’. This is perhaps the most important skill a person can develop for approaching a difficult problem. From my experience teaching undergraduate students it’s also the skill most sorely lacking from our country’s educational system—that’s not a dig at the public schools, both my parents are retired teachers, it’s just the truth. Students are often ill-prepared for reflective thinking and expect instead to be able to just blaze ahead working by brute force. Take some time to think quietly and reflectively on how you’re going to accomplish this task. Otherwise you’ll waste an extraordinary amount of time, i.e. 48hours + of wasted effort!!

 

Here you are calculating the HHI for the top 10 markets and top 2 hubs. We define a ‘market’ as a ‘city-pair’. Find and download the data, then figure out how to organize it in a useful format. I would try to identify the 10 markets for which the pre-merger airlines have the largest combined market share. For hubs, I bet you could just use ORD and DFW. If you get stuck trying to identify the 10 markets with highest pre-merger concentration, you can ‘cheat’ by importing the city-pair/HHI data from the ‘merger document’ mentioned above into Excel. You’ll write this up in 3-4 pages.

 

Part Two, Final: Due with Module 10.

 

Here you’re just revising what you did in Part 2, Milestone 1, plus some details i.e. your recommendations of an alternative policy approach.