Re: McDonnell Douglas & Boeing To Merge -- Press Release Text

Date:         19 Dec 96 03:06:31 
From:         Bahadir Acuner <>
Organization: Virginia Tech - Economics Dept.
References:   1 2 3
Next article
View raw article
  or MIME structure

Karl Swartz wrote:
> >Out of curiosity, would there be any warranted efforts to stop this
> >merger because of anti-competitive forces (or over concentration) ?
> With relatively little business overlap, it seems unlikely.  (MD's
> commercial division was soon to be dead anyway.)

Well, that's a perspective to that. However, if you just take the market
share perspective there are couple of ways for FTC and Dept. of Justice
to look at this. For instance the Herfindahls index. You basically take
the square of the company marketshares  in the industry and add them
together. If you get a value > .60 then the industry is a monopoly.
	If DoJ deals with the US market share only then we definetely get a
value higher than .60..

> The MD-95 is almost surely dead.  If ValuJet had't pushed them to make
> it bigger, perhaps it might have survived as Boeing's 100-seat plane,
> but even that would have been a long-shot.

Of course, the issue that we will be discussing will be if Valujet will
be around or not with the potential market growth that would give enough
bottom line to support 50 brand new jets...

> It will be interesting to see what Boeing does about the MD-80/90.  On
> the one hand, Boeing doesn't want to compete with the 737.  But Boeing
> also doesn't want to alienate big customers by causing a huge, instant
> devaluation of their MD-80/90 fleets.  Delta, for example, might not
> be thrilled with a huge write-off on the MD-88 and MD-90-30 fleets.
> We might see Boeing offer some sort of trade-in deal to soothe things,
> and not incidentally to try to keep Airbus' foot out of the door.

I have a feeling that a 100 or 70 pax derivative of MD family jets would
be a good product to keep in their product line.

Bahadir Acuner
Virginia Tech
Blacksburg, VA