Deregulation, competition, and antitrust implications in the US airline industry

Abstract Current problems in the US airline industry such as increasing industry consolidation, fortress hub dominance, predatory behavior, and high fare “pockets of pain” have their roots in the flaws of the theories that supported airline deregulation in 1978. Contrary to pre-deregulation expectations, the industry is characterized by large economies of scale, large barriers to entry, and a lack of contestability in airline markets. These inexorable economic forces are producing increased levels of monopoly and oligopoly control over city-pair markets resulting in a larger share of travelers paying higher fares. Additional mergers and acquisitions will exacerbate the problem. As these trends continue, the US Congress and the US Departments of Transportation and Justice will be under increasing pressure to take serious corrective actions.

[1]  Shih-Lung Shaw,et al.  Hub structures of major US passenger airlines. , 1993 .

[2]  William A. Jordan.  Airline regulation in America , 1970 .

[3]  Morton E. O'Kelly,et al.  A geographer's analysis of hub-and-spoke networks☆ , 1998 .

[4]  M. Nerlove,et al.  A LONG-RUN COST FUNCTION FOR THE LOCAL SERVICE AIRLINE INDUSTRY , 1969 .

[5]  R. Caves.  Air Transport and Its Regulators: An Industry Study , 1962 .

[6]  G. Douglas,et al.  Economic Regulation of Domestic Air Transport Theory and Policy. George W. Douglas and James C. Miller III. The Brookings Institution, 1775 Massachusetts Avenue, N.W., Washington, D.C. 20036. 1974. 211p , 1975 .

[7]  Neil Sorenson,et al.  THE IMPACT OF GEOGRAPHIC SCALE AND TRAFFIC DENSITY ON AIRLINE PRODUCTION COSTS: THE DECLINE OF THE NO-FRILLS AIRLINES , 1991 .

[8]  P. Flint.  IS BIGGER BETTER , 1998 .

[9]  E. Gellhorn.  Antitrust law and economics in a nutshell , 1994 .

[10]  A-J Reynolds-Fieghan,et al.  The Impact of US Airline Deregulation on Airport Traffic Patterns , 1997 .

[11]  P. Dempsey,et al.  Airline deregulation and laissez-faire mythology , 1992 .

[12]  Thomas L. Friedman,et al.  The Lexus and the Olive Tree: Understanding Globalization , 1999 .

[13]  Tae Hoon Oum,et al.  Airline Economics: Foundations for Strategy and Policy , 1992 .

[14]  Stephen F. Wheatcroft.  The economics of European air transport , 1956 .

[15]  Timothy M. Vowles,et al.  The geographic effects of US airline alliances , 2000 .

[16]  Sources of Productivity Increases in the U.S. Passenger Airline Industry , 1969 .

[17]  John H. Anderson.  Airline competition : barriers to entry continue in some domestic markets , 1998 .

[18]  Changes in the Interurban Accessibility of Ohio Cities in the Era of Airline Deregulation , 1993 .

[19]  P. W. Cherington,et al.  Airline price policy : a study of domestic airline passenger fares , 1959 .

[20]  M. Straszheim.  The international airline industry , 1969 .

[21]  S. Borenstein.  Hubs and High Fares: Dominance and Market Power in the U.S. Airline Industry , 1989 .

[22]  John H. Anderson.  Domestic aviation : service problems and limited competition continue in some markets , 1998 .

[23]  Russell L. Ivy,et al.  Variations in hub service in the US domestic air transportation network , 1993 .

[24]  Anderson.  DOMESTIC AVIATION: BARRIERS TO ENTRY CONTINUE TO LIMIT BENEFITS OF AIRLINE DEREGULATION. TESTIMONY , 1997 .

[25]  Clifford Winston,et al.  The Evolution of the Airline Industry , 1994 .

[26]  Shih-Lung Shaw,et al.  Airline mergers and their effect on network structure , 1994 .

[27]  R. Gordon.  Airline Costs and Managerial Efficiency , 1965 .

[28]  M A Brenner,et al.  AIRLINE DEREGULATION : A CASE STUDY IN PUBLIC POLICY FAILURE , 1988 .

[29]  Keith G. Debbage,et al.  U.S. AIRPORT MARKET CONCENTRATION AND DECONCENTRATION , 1993 .

[30]  Andrew R. Goetz,et al.  The Geography of Deregulation in the U.S. Airline Industry , 1997 .

[31]  T. Vowles.  THE EFFECT OF LOW FARE AIR CARRIERS ON AIRFARES IN THE US , 2000 .

[32]  Lawrence J. White,et al.  ECONOMIES OF SCALE AND THE QUESTION OF "NATURAL MONOPOLY" IN THE AIRLINE INDUSTRY , 1979 .

[33]  Michael E. Levine,et al.  AIRLINE COMPETITION IN DEREGULATED MARKETS: THEORY, FIRM STRATEGY, AND PUBLIC POLICY , 1987 .

[34]  Y. Chou.  Airline deregulation and nodal accessibility , 1993 .

[35]  Philip A. Viton,et al.  Air deregulation revisited: Choice of aircraft, load factors, and marginal-cost fares for domestic air travel , 1986 .

[36]  T. Vowles.  The “Southwest Effect” in multi-airport regions , 2001 .