According to the article, “Timeline of US Airline Merger History,” in 1978, the

Question

According to the article, “Timeline of US Airline Merger History,” in 1978, the government passed the Airline Deregulation Act, which phased out the Civil Aeronautics Board’s authority over pricing, routes, mergers, and interline agreements, and shifted that control to the airlines. More than 30 years later the effects are still being felt by airlines and air travelers. In the years that have passed, a number of airlines bought out or merged with smaller or struggling carriers. In more recent years, major carriers have started to merge, creating the largest airlines in the world. Those airlines have started cutting capacity, flights, cities, and routes — and in the process raised fares. What impact has this had on the industry and airline profitability?

Explanation / Answer

The impact which Airlines Industry is witnessing is the monopolies and Oligopolies have again started resurfacing. After the deregulation as the barriers were lowered for Airlines business many new Airlines entered the market. As a result the competition increased which led to price decrease.and by 2000s many Airlines had filed for bankruptcy. As a result less number of players have remained in the market. These airline businesses have consolidated their businesses with mergers and acquisitions. These has led to decrease in the competition and customers are left with fewer options. The service levels are declining in the industry as the focus is on sustaining the business and maintaining position. These airlines which are in control of major routes and have fleet of airplanes dominate the market. Airline passengers face issues frequently.

The profitability of airlines business depends and vary as per many other factors like economy and fuel prices. It has been changing from time to time. Though many airlines have file for bankruptcy and have seen losses, airline profitability has increased for some airlines which have major market share giving them the advantage of economies of scale and integration with other smaller airlines while for the low cost carriers the business may not be profitable and is subject to further changes in the market conditions.

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