Airline Competition

Air transport has radically evolved over the last two decades. Liberalisation and deregulation of the sector have facilitated the entry of new firms, which in turn has had a positive impact on competition and innovation. Deregulation and liberalisation also significantly altered marked structure, giving rise to mergers of flag airline carriers and diverse forms of collaboration.

However, in some cases, collaboration can actually be anti-competitive. It is essential to ensure that former regulatory barriers are not replaced by anti-competitive airline mergers, alliances, agreements and unilateral practices.

In June 2014, the OECD Competition Committee held a discussion on Airline Competition to examine the main competition issues in the sector and how competition enforcement authorities have been dealing with them.

An executive summary with the key findings from the discussion is available. See below an extract of these key findings.

» See the list of all Competition Policy Roundtables

Key findings from the discussion

SUMMARY DOCUMENTS

Executive summary with key findings | Synthèse

Detailed summary of the discussion | Compte rendu detaillé

Full list of documents

SEE ALSO

Airline Mergers and Alliances, 1999

Competition Policy and International Airport Services, 1997

A Competition Policy Assessment of the Domestic Airline Sector in Mexico, 2010

Competition Home Page ‌

Air transportation is a vital sector for the global economy, customers and governments...

yet, the sector still remains heavily regulated at national and international levels...

At the international level, cross-border traffic rights still depend on bilateral air service agreements, which generally include a nationality condition. This explains why international airline mergers are rare and why airline alliances have developed extensively.

At the national level, incomplete liberalisation as well as a trend towards re-regulation can be observed, especially where market distortions, inefficiencies or consumer harm arise but cannot be tackled through antitrust enforcement.

The industry is characterised by three driving trends which play an important role in the competition analysis of airline behaviours and agreements...

A hybridisation of business models which blurs the traditional distinction between full service and low cost carriers

A consolidation of the industry through airline alliances, from basic interlining co-operation agreements to far-reaching joint ventures, alliances constitute the main “phenomenon” competition authorities have to assess.

A recurrent exposure to financial distress, which may be due to internal (e.g. mismanagement) or exogenous (e.g. oil prices) factors. The debate is open as to whether it is warranted for governments to help certain airlines, how it creates (dis)incentives for other airlines to compete, and how it affects the playing field across jurisdictions.

Three types of barriers to entry and expansion in air transport markets have recently attracted considerable attention...

Access to airport slots (structural barriers), airlines’ loyalty schemes and drip pricing strategies (strategic barriers). Such barriers call in certain circumstances for antitrust enforcement or regulatory responses, at the crossroads between competition, consumer protection and transport policies.