An Analysis of the Air Transport Industry as an Oligopolistic Market

This report examines the air transport industry as an oligopoly, highlighting key characteristics such as a small number of suppliers, barriers to entry, and product similarities. The analysis references specific market data, including the concentration of market share among a few major players and the impact of mergers and acquisitions on market dynamics. It discusses the oligopolistic behavior, including interdependence, mergers, and non-price competition, such as branding and promotional activities. The report uses examples like the US airline market and mergers between US Airways and America West, and United and Continental Airlines to illustrate market features. It also touches on the role of suppliers and the competitive advantages that large companies have, such as economies of scale. The report provides insight into the air transport industry's economic structure and competitive strategies, including how firms respond to market changes and the importance of non-price competition.

Running head: AIR TRANSPORT INDUSTRY
Air Transport Industry
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AIR TRANSPORT INDUSTRY 1
Air transport industry is characterized as an oligopoly market. The aircraft manufacturers are
having control over price. The oligopoly market has four companies who are covering fifty
percent of the market. The air transport market has few major players who are denominating the
market. According to the US airlines market, the four largest markets are having 60.1% share of
the total market, and it shows the oligopolistic situation. The mergers between the US Airways
and America West took the sixth position in the list. The merger affects the market share of
airlines which is another characteristic of an oligopolistic market. Another merger between the
United and continent concentrate 69.3% of the market (Hüschelrath et al., 2016). The airlines
provide oligopolistic services in the market. The main elements of market feature include a small
number of suppliers, the barrier to entry and common product types. The airline's suppliers are
mainly four who owned the total market share of Airlines industry. The new companies face the
difficulty at the time of enters and exit in the airlines market. The barriers include a huge amount
of capital investment, scarcity of resources, legislative restrictions, and patent restrictions. The
products produced in the oligopoly market are very similar with no distinction at all. The air
transport industry competitors manufacture similar goods which reflect that the air transport
industry is an oligopoly market. The features of market behavior include interdependence,
merger and acquisition and non-price competition (Vasigh et al., 2013). The air transport
industry is influenced by the market which causes the players to respond by changing the price,
movement, and others. The merger and acquisition took place in the air transport industry which
involves substantial marketplace control. The merger in the air transport industry took place, and
it impacts on the market share. For example: a merger between the US Airways and America
west results into the sixth position in the market. The non-price competition is the feature of air
transport industry. The competitors are not preferred to compete on price, and they prefer to

AIR TRANSPORT INDUSTRY 2
differentiate the product in the market. The airlines promote the brand through advertising and
various promotional activities which are the characteristics of oligopoly market. The evidence
includes small suppliers which help to make extra profits for a company through various
promotional activities which help to make the image of the brand in the eyes of the consumers.
The extra profit earned to be used in the product development, enhance the services, R&D in the
field of the air transport industry (Aguirregabiria at al., 2012). The mergers are aggressively
taking place in the airline industry which impacts on the market share of the industry. The large
sized companies have the competitive advantage of economies of scale. Thus, the above
evidence shows that the air transport is the oligopoly market.

AIR TRANSPORT INDUSTRY 3
References
Vasigh, B., Fleming, K., & Tacker, T. (2013). Introduction to air transport economics: from
theory to applications. Ashgate Publishing, Ltd..
Hüschelrath, K., & Müller, K. (2016). Market Entry and the Evolution of the US Airline Industry
1995–2009. Liberalization in Aviation: Competition, Cooperation and Public Policy, 13.
Aguirregabiria, V., & Ho, C. Y. (2012). A dynamic oligopoly game of the US airline industry:
Estimation and policy experiments. Journal of Econometrics,168(1), 156-173.