The US airline industry has been taken as an in-depth case study. This thought-provoking book chronicles the evolution of the airline industry and explains what lies ahead for airlines across the globe. The authors present compelling evidence on how the paradigm shift that is taking place in the airline industry is linked to the big-bang approach to deregulation.
There are lessons to be learned from the US as Europe and Asia undergo the (airline) deregulation experience from a public policy as well as a corporate perspective. Deregulation and Competition: Lessons from the Airline Industry also addresses the crucial question of what will happen to the airlines that are in turmoil. In addition to the comprehensive analysis of the airline industry's evolution, the authors draw from extant ...
Chapter Four: Predatory Pricing
As explained in chapter three, the six major airlines (American, United, Delta, US Airways, Northwest, and Continental) that existed before deregulation in 1978 developed 15 major hub markets dominated by one or two major airlines. The major airlines were able to dominate/monopolize their hub airports based on a number of factors already discussed. They gained dominance over their hub airports by:
- mergers of major airlines,
- controlling most of the airline landing slots,
- purchasing most of the major feeder airlines,
- using frequent-flyer loyalty programs,
- giving ticket agent commission overrides (TACO), and
- using biased reservation systems.
These major airlines often charged fare premiums of 20–40 percent in the 15 hub markets which they dominated/monopolized, in comparison to the next 30 to 35 largest markets. This came unexpectedly following deregulation in 1978, ...