How Stable are Scheduled Air Transport Markets

There has been a global trend to remove many of the traditional regulations governing the way that airlines services are provided. This has been a response to the demonstrable inefficiencies that accompanied such things as rate controls and market capacity limits. The outcome has largely been seen as beneficial to air transport users. In recent years, however, many airlines in liberalized markets have suffered large financial losses as excess capacity have emerged. This has been in the context of generally healthy financial positions of other actors (e.g. airports and global distribution systems) further back in the value chain. The difficulty stems from a lack of fully competitive markets throughout the air transportation supply chain together with the nature of competition that has emerged in the airline market itself. In particular, the need to offer a scheduled departure imposes fixed costs for each airline service that cannot be fully recovered in competitive, and possibly contestable, condition.