Thinking Clearly about the Airline Industry

In this article (Paragraph No. 10,521) the airline industry’s problems are very visible but there may be confusing systems for causes. Bankruptcy and unprecedented financial losses only underscore the long-standing central weakness of this sector; an unbalanced regulatory framework hosting an unperfected economic model. While oil pricing, labor costs, pensions, taxes, and capacity levels all primary roles in any airline’s cost mix and economic performance, none are causal per se. Industrial and economic polity within which production inputs are organized, along with an appropriate economic model, determine the industry’s production function. Various sources of difficulty to the airline industry, such as labor law, ownership restrictions, or operations issues may, indeed, be important to remedy, but along with simple assertions for cost relief, still only scratch the surface of the commercial challenges facing the industry. Airline industry stakeholders are entirely missing the opportunity to modernize and improve the larger aviation system by developing tailored policy solutions. The author argues that many of the assumptions concerning both competition and antitrust economics may be fundamentally misapplied to the airline industry. The industry’s inherent supply economic demands less intrusive rivalry at the operating level in order to achieve equilibrium, as well as an understanding that consolidation is a natural market outcome with potential benefits far superior to those that would be generated by serial rivalry. The coordinated planning and integrated financial accounting of supply across the entire airline system (aircraft, airports, airspace, airlines, after-market, agencies) will solve for systematic non-clearing markets under distorted quantity signaling, which is the root cause of the industry’s instability, the author concludes.

  • Corporate Authors:

    International Aviation Law Institute

    DePaul University College of Law, 25 E Jackson Boulevard
    Chicago, IL  United States  60604
  • Authors:
    • ANDERSON, MATTHEW G
  • Publication Date: 2008

Language

  • English

Media Info

  • Media Type: Print
  • Edition: Transfer Binder 2: 2004-2008
  • Features: References;
  • Pagination: pp 4195-4212
  • Monograph Title: Issues in Aviation Law and Policy

Subject/Index Terms

Filing Info

  • Accession Number: 01141838
  • Record Type: Publication
  • Files: TRIS
  • Created Date: Oct 6 2009 2:11PM