Oneworld There Will Be a Few Different Essay

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There will be a few different consequences of a few large airlines or networks dominating global air service -- some good for consumers and some bad. Some of the advantages that have emerged thus far include better coordination of connections to improve service, and different tactics to improve marketing such as code-sharing. These changes are generally beneficial to both the customers and to the airlines as well. The reason these changes are beneficial is in part because the formation of these networks has been driven by competitive demands. The airline industry is in a state of monopolistic competition, but with a commoditized base service. Airlines are seeking ways to differentiate without competing on price or altering the base service. For the foreseeable future, these networks are likely to result in improved operating profits for airlines and improved services for consumers, as the airlines are still in a state of intense competition.

Should a handful of networks come to dominate world markets, the industry would shift towards an oligopoly state.

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Under oligopoly conditions, the companies would be able to increase prices and standardize service among the different networks. Such actions could be the result of collusion, but more likely the result of passive transition towards an industry mean. For consumers, choice would decline, as would service standards. Prices would increase, because the industry no longer has a high level of competition. This is why antitrust authorities examine these arrangements -- they want to ensure that the competition level remains high so that these tie-ups are beneficial to consumers. At some point, they will become detrimental.

However, it should not be expected that oligopoly conditions could exist in the long-run. There are few barriers to entry for airlines. One would think that the high cost of aircraft and difficulty in turning profits would be high barriers to entry, but new airlines are common and several recent new entrants have been successful. Without strong barriers to….....

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