European Airline Mergers and Acquisitions: an analysis of the influences of European airline merges and acquisitions on shareholders'wealth

Mergers and acquisitions have been very active in the airline industry since the Airline Deregulation Act of 1978. This thesis studies the influence of the mergers and acquisitions on the capital market reaction over the period 2000-2010. By applying an event study, the extent to which stock returns under the event window deviate from the expected stock returns in the absence of the event is calculated. The results show that the shareholders of bidding firms experienced cumulative abnormal returns of 0.45% and 0.71% over the periods of three days and five days around the M&A announcement date, while the shareholders of target firms experienced a greater impact with significant cumulative excess returns of 8.14% and 13.37% under the same event windows. Additionally, my finding indicates that the mergers and acquisitions transactions are the manner of value creation based on the fact that a statistically significant positive abnormal return to the combined entities is found in this study. Cross-sectionally, the finding shows that the cross-border M&A experienced a larger premium than domestic M&A in the European airline industry. The Airline M&A located in the Continental Europe on average experienced a higher abnormal return when compared with the airline M&A in the UK. But, there is no evidence found that the M&A with cash payment had a greater impact on the stock market than the one with non-cash payment.