The International Airline Industry

Paper Summary:

In the international airline industry, the notion that "bigger is better" has led to industry-wide consolidation via mergers and acquisitions as national barriers to market expansion are diminished. At the same time, there are growing concerns being expressed by consumers and regulatory agencies alike that consolidation of airlines on a global scale may not necessarily be in the best interest of these groups. The airlines may be opening the door to some kind of re-regulation both in the United States and in Europe. This paper examines these matters in the context of an international industry environment that faced difficult times in 1999, when a rise in fuel prices and growing market competition drastically effected the budgets of both domestic and international carriers. An overview of the industry is followed by a discussion of hub systems and their effects, code sharing agreements and strategic alliances, internet ticket sales and related matters.

From the Paper:

"In the United States, David Leonhardt (1998) has reported that the government is being pressured by interest groups representing smaller airlines to deregulate route control policies and to open up competition to smaller carriers that are now not able to compete in certain major markets. Five separate airline bills are still pending in the US Congress and the airline industry lobby groups are competing for the votes of key elected officials. As Leonhardt (1998) states, these special interest groups are lobbying elected officials and attempting to influence civil servants at the Department of Transportation who will participate in providing Congress with the information upon which deregulation decisions will be made."

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