Is the airline industry monopolistic? Which is worse, monopolies or competition?

The recent events in the U.S. airline industry imply that the market is becoming a monopoly. According to Harlan (2015), nine major airlines in the U.S. have merged to four since 2005. The four airlines include Delta Air Lines, American, Southwest Airlines, and United Airlines which currently controls about 80% of the U.S. airline market. The figure shows airline mergers in the U.S. since 2000.

Figure 1: The U.S. Airline Mergers 2000-2014

https://img.washingtonpost.com/rf/image_480w/2010-2019/WashingtonPost/2015/09/27/Business/Graphics/promo-airline0927.jpg?uuid=3-zSFGSrEeWEdXgcyYUWUg

Source: Harlan (2015)

The U.S. Airways and American Airline agreed to merge in 2013 in an $11 billion deal (Harlan, 2015). The American Airline already ranks fourth out the five world’s largest passenger airlines. Therefore, the merger with the U.S. Airline will create a monopoly in the U.S. airline industry because the new airline will control almost the entire industry. Nonetheless, it is important first to weigh the benefits and shortcomings of a monopoly and a competitive airline market before implementing the decision.

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Advantages and Disadvantages of a Monopolistic Airline

The merger will give other airlines opportunities to enter monopolized routes and charge less thus benefiting customers (Leamy, 2013). However, the monopoly will reduce customer choice. For example, the mega airline will charge same fair thus customers will have a fewer price and services to choose. The new airline might also decide to reduce flights in a particular route thus allowing airlines left using the route to increase fare.

Pros and Cons of a Competitive Airline

Competition in airline means more operators and many places to go. According to Leamy (2013), a competitive market allows new airlines to explore different routes thus giving customers opportunities to travel to many new places. A competitive airline also encourages operators to buy nice aircrafts with free Wi-Fi, meals, and in-flight entertainment among other features thus increasing customer satisfaction (Leamy, 2013). Customers also do not compete for tickets as each airline has to upgrade its seats to remain competitive in the market.

Conclusion

Making the U.S. airline a monopoly will benefit the airlines through higher prices and profits. However, monopoly will reduce customer choice and increase fare. Therefore, the U.S. should maintain a competitive airline industry to ensure broad customer choices, low fare, and quality services.

 

References

Harlan, C. (2015, September 25). Landing a mega-merger: The last days of US Airways. The Washington Post. Retrieved from https://www.washingtonpost.com/business/the-last-days-of-us-airways/2015/09/25/f5530686-60a6-11e5-8e9e-dce8a2a2a679_story.html?utm_term=.5dc38352cd3d

Leamy, E. (2013, February 18). Pros and cons of an American and US Airways merger. ABC News. Retrieved from http://abcnews.go.com/Business/pros-cons-american-us-airways-merger/story?id=18516230