Aviation

OLIGOPOLY - AIRLINES INDUSTRY

An oligopoly implies a market where there are few sellers for a product members control the market through friendly competition , have barriers to entry due to high cost and are beyond government regulation unlike monopolies . The firms within an oligopoly are interdependent and advertising is prevalent at national as well as international levels The degree of market concentration is high as a large portion of the market is taken up by the leading firms . Firms also produce branded products with limited flexibility in prices . Oligopoly firms are said to

br be very large with respect to the market in which they operate and hence if one firm changes its price it significantly impacts others Oligopolies also attain substantial economics of scale with growth through the merger route

The economics of the airlines industry is dictated by high technology turnover , government control and subsidy , airport capacity and route structures , high cost of aircraft , fuel and labor and sensitivity to cyclical fluctuations of economy . There are high fixed and operating costs to include a large number of variables . Airlines operations are highly leveraged requiring companies to regularly purchase new aircraft make long term fleet decisions to meet demands of the market and invest in a fleet that is economical to operate and maintain . Oil and fuel cost is the next major issue which is dynamic at present . Product consistency and cost control are thus important issues in airlines management

The airlines industry in the USA is dominated by a small number of firms displaying trends of an oligopoly . Thus American , United Southwest and Delta continue to dominate the airlines space in the USA despite many shakeouts . The United Airlines fits in well as an oligopoly airlines carrier in the United States . The scale of operations with 3 ,700 flights a day on United , United Express and Ted over 210 U .S domestic and international destinations provides it the ability to negotiate with its competitors from a position of strength . The hubs for operations are Los Angeles , San Francisco , Denver , Chicago and Washington , D .C . By dominating these hubs , it can seek economies of scale in airport management , fuel and other costs . The air line also has global air rights in the key Asia-Pacific region , Europe and Latin America . The agreement worked out by United with Star Alliance adds to its image as an oligopoly operator as it enables connections to 842 destinations in 152 countries worldwide , thereby dominating the international market as well . United Airlines aircraft inventory is restricted to only two companies , Boeing and Airbus . In fact it was exclusively acquiring aircraft from Boeing till a few years before thereby enabling sustenance of its monopoly . United Airlines creates an oligopoly by rights on specific routes which enable it to dominate air travel to China , US - Narita and then to Asia and U .S .-Heathrow routes which are most profitable . It also achieves an oligopolistic position by providing a premium economy product known as Economic Plus , with possibility of exclusivity...