The impact on production and costs after the acquisition of an airline by a competitor in Brazil: a Cobb-Douglas function application

Objective of this paper is to analyze the impact on production and air transport costs as result of the acquisition of an airline in growth by its dominant competitor with similar operational pattern. Two Cobb-Douglas functions, related to production and costs respectively, were used for such analysis, considering the periods before and after the acquisition. We take as example for analysis the acquisition of Webjet Linhas Aereas SA by VRG Linhas Aereas (GOL Linhas Aereas Inteligentes) officially consolidated in October 2012. The results demonstrate that the acquisition of the market growing company with similar operational pattern provided negative impact on the company's productivity, showing loss of operational efficiency and increased costs, not absorbing in full production potential that the acquisition of the company could bring. Such methodology demonstrated to be effective in the impact analysis of such kind of operations since permits conclusions based on econometric results to be used by decision makers.