A few years ago there were congressional hearings about the accusation against the larger airlines actively working to shut out any smaller newcomer to certain hubs around the world.
While the ability and willingness of incumbent airlines to respond to competitive entry is central to competition, at some point that response may cross the line of fair competition and become an unfairly exclusionary practice intended to drive the entrant from the market. When that happens, the result is insufficient competition to discipline the incumbent with resulting higher fares and possibly lower service compared with a situation where the entry had been successful (Clinton, 1998)."
In this situation congress agreed that the larger airlines were purposely driving the smaller ones out of hubs by price gouging and they were ordered to stop.
The airline industry is an extremely fickle market. One day prices may be through the roof, while the next day they may plummet below expectations. While these variances in prices can be exasperating for customers, if it is occurring due to honest, healthy competition there is little to be done about it. However, if it is occurring because a large strong airline is trying to force out the smaller lower, fare airlines it is against anti-trust laws, and can be stopped. The problem with allowing monopolies is that in the end the customer pays the price by making up the revenue that was lost during the price war by having prices doubles or tripled once that price war has ended.
Competition among airlines, on the other hand, can benefit consumers with lower rates, stepped up customer service and the attempt to win the customer back during their next need for a flight.
Kennedy, Tony (1997) Reno Air files suit against NWA; Reno Air opened daily passenger service between Minneapolis-St. Paul and Reno-Lake Tahoe in April 1993. The airline retreated from Minnesota within 90 days. In antitrust action, the carrier is accusing Northwest Airlines of using its monopoly power to force it out of the Twin Cities.(Business) Star Tribune (Minneapolis, MN)
This was a good example of an article that deals with the topic at hand because it used an American airline company as the basis. Around the world in recent years there have been many issues with airlines, including security issues, monopoly issues, financial and bankruptcy issues as well as lay offs and closings. With all of these elements happening at once in the industry this article sheds light on how tense airline relations have become and how important it is to correctly and carefully interpret the anti-trust laws to be sure that each company is being treated fairly.
Le, Thuong T. (1997) Reforming China's airline industry: from state-owned monopoly to market dynamism. Transportation Journal
This was a valuable source for the paper about monopolies and competition in the airline industry because it provided an overview of a large monopoly and explored the ways the process was changed to make it a competitive industry. China has always been known as strict, dictatorial and rigid until recent years when it began trying to join the western world's trade organizations and other things. Once that was desired China began trying to tweak its business ethics and process to more closely match others in the world. This article provided a bird's eye view of this occurring in the airline industry as China moved it from a state owned monopoly...
While it was a pretty good article and provided information that was valuable for the paper, the one issue I had with using it was that the information was relatively short and could have been much more in-depth to be more effective.
Kennedy, Tony (1997) Northwest sued over alleged fare overcharges; a lawsuit claims that the 1986 Northwest-Republic airline merger created monopoly pricing and seeks a massive refund for ticket buyers.(NEWS) Star Tribune (Minneapolis, MN)
This was a source that was chosen because it provided an example of what can happen in the court system if a person, a group or a business believes that an airline is working to conduct itself in the same way that a monopoly conducts itself. The article was shorter than I would normally choose to use as a reference but it provided a viewpoint that had not yet been covered and was important to the completion of the paper.
Dodge, Robert (2001) Airline executives testify before Senate panel on security, monopoly issues.(the Dallas Morning News) Knight Ridder/Tribune News Service |
The main reason that this particular article was chosen to be used in the paper about airline monopolies and competitions was because it incorporated knowledge about testifying before senate panels. The airline industry has spent more than its fair share in front of various legislative bodies in recent years and this was an important element to explore and examine in the preparation of this paper. This exact article was chosen because of the security and monopoly issues that were included.
____(1998) AIRLINE INDUSTRY COMPETITION:CLINTON V. OSTER, JR.
This article was chosen because it provided an in-depth view of how congress works when it comes to the airline industry. The compete and total discussions, coupled with the extensive research that is done before such congressional hearings and discussions take place make such articles hotbeds of information for the purpose of research and paper writing. The use of congressional hearings and testimony for papers has long since been a valid source and one that is easily verified because of the public nature of the transcripts following such discussions.
Competition (1998) BARRIERS to AIRLINE COMPETITION:PAUL STEPHEN DEMPSEY. Congressional Testimony
While there were several different congressional testimony transcripts used in the paper at hand this one was important in its own right. The reason this particular one was chosen to use in the paper was the fact that it illustrated the barriers to airline competition. In many instances the discussion about airline competition and airline monopolies centers on some subtle differences that are often quite arguable. The decision about whether an airline is conducting itself as a monopoly or a competitor can be quite subjective, however, this transcript of congressional testimony provides a blueprint to understanding the difference as it outlines the boundaries of airline competition and the problems and limitations being placed in their pathways.
____(1998) STATE of AIRLINE INDUSTRY COMPETITION:ELLIOTT M. SEIDEN. Congressional Testimony
In keeping with the other congressional testimony transcript in which airline competition barriers are discussed, this particular article was chosen because it takes the topic a step further by providing the discussion of the state of airline industry competition. While it was closely related to the barriers to airline competition it uses the same ideas but provides an overview of…
The OFT may then refer the companies to the Competition Commission (formerly known as Monopolies and Mergers Commission). The Competition Commission also plays a major role to investigate the situations which are called 'Oligopoly Situations' which involve explicit or implicit collusion between firms. Then the Competition Commission decides if the monopoly is acting against the public interest or not. And if they find a firm with a monopoly situation they
The lack of incentives or competitive pressures may lead monopolistic firms to neglect minimizing unit costs of production, i.e., to tolerate "X-inefficiency" (phrase coined by H. Leibenstein). Included in X- inefficiency are wasteful expenditures such as maintenance of excess capacity, luxurious executive benefits, political lobbying seeking protection and favourable regulations, and litigation" (Khemani and Shapiro, 1993). In all, monopoly is the economic state in which a single company produces a
Instead, IBM began to falter after a series of product failures. As a result, many companies gained market share against IBM with some even over taking it; an efficient market took care of the issue. Yet, another example of why government should not interfere with market structures is the airline industry. After 1978, the airline industry was quickly transformed into an oligopoly market structure where only a half dozen or
Now the stores want to make sure that the turkey that they sell is the best turkey and cost the least. In this situation they are competing for the consumer's business. However, business owners of a monopoly situation disagree with the government. When there is a business that has the potential to become a Competition vs. Monopolies 2 monopoly the government watches it very closely and the business has to
Competition Laws in Hong Kong Competition is a mainstay in business just as much as it is for any sports team. Businesses, in general, would probably rather that they have their industry all to themselves, but healthy competition drives the market. Without it there would be no need for innovation, and the one company could set the price of goods wherever they wanted to. Therefore, competition is good for a business
Competition in these markets, therefore, is unlikely to be on the basis of product innovation. Service innovation is possible to some degree with the Internet, but there are only so many ways to deliver insurance -- it is a product centuries old and not subject to much innovation. In a market like this, service and price are two methods of gaining competitive advantage. Private insurance firms use proprietary actuarial