Common Ownership Does Not Have Anti-Competitive Effects in the Airline Industry

Institutions often own equity in multiple firms that compete in the same product market. These institutional ``common owners" may induce or mandate anti-competitive pricing behavior among the product market rivals. This paper evaluates prior evidence of such behavior between competing airlines. The measure of common ownership is a function of each airline's market share, as well as the cash flow and control rights held by the institutions that own the airlines competing in the same market. Using placebo tests, we show that the documented positive correlation between common ownership and ticket prices stems from the market share component of the common ownership measure, and not the ownership and control components. We examine other econometric and data measurement issues and show that the previously documented results are fragile to reasonable alternative mappings of equity votes into control rights, as well as alternative assumptions about equity holders' ownership and control during bankruptcy. Our results obviate the need for policy aimed at restricting the holdings of institutional managers