Competition on airline routes
The current competitions on all airline routes are of caused by the different regulations such as the nature of airline competitors, policies available and the market aggressiveness. Most airlines competitions diminish due to poor management thus leading to increase of airline transport cost to increase cost. However, this is avoidable if the regulations are adhered. In addition, if the market had high competition, most airlines would try to reduce there a fare. The increasing attention of the Fair Trade Commission of Japan (FTCJ), acts promptly, thus promoting competition. During the month of September 11, the airline industry had an extreme economic effect, because deregulation affected clients thus leading to a decrease in the passengers demand thus increased cost. However, before the deregulation was brought, the Department of transportation (DOT) held that any airline that was considered good condition was allowed to fly to any domestic route. Competition changes were made in the (DOT) through primary regulatory role, which checked whether the airlines were operating on the public interest or with accordance to the safety standards and procedure.
Most international airline routes have been deregulated through open talks, which pave way for the airlines to fly to any destination. With this agreement, they lack competition in the market because some passengers are allowed in the United States of America and vice versa. Federal regulations that affect certain airports include Federal slot Regulations, which helps to avoid crowding in the airports and allowing an aircraft to land or depart.
The basis of airline competition
In Figure 1 the introduction of deregulation in the U.S.A airline industry has led to its extreme growth. The table above shows the airline passengers for both U.S and Canada for the last 25 years. Canada had a fewer competition towards the U.S. When it deregulated, it increased to a rate of 80 hence combining competition and deregulation which triggers increase in the airline industry.
In Figure 2 in both U.S. and Canada, price seems to be the same for a period although the price for Canada does not change. U.S. has had a steady drop meaning that the customers have gained through the decrease of transport charges. Though there is decrease in the U.S. transport charges, the unrestricted cost paid by business persons travelling tends to rise thus leading to an argument that airline have not gained. Due to this, most airlines started to operate on a hub-and-spoke system, which allows airlines to connect. These airlines included the united hubs, examples Chicagos OHare, Denver, and Washingtons Dulles. Precipitating exits may influence the rate of profit margin in the airline industry. This is because most airlines cost depends on the amount of labour and fuel, which are stable for a short, while.
The effects of policies on competition
Due to both competitive and deregulated industry mix, most policies may affect the competition such policies include Central policy choice, which is used to identify boarding gates and facilities although many airlines still really on the non-market mechanism. Having this policy helps in changing increase in competition between the airlines and sometimes gives the airport authorities higher traffic intake when the cost is lower than the bid.
Antitrust policy increases the airfares affecting the consumers in the market. However, most consumers benefit from the congested market through the expanded networks of frequent and more accommodating airplanes. A third significant policy dimension includes denial of foreign ownership of airlines and other domestic flights. Accepting foreign ownership increases competition to the owner and denies other countries. This safety and regulations help to stabilise the competitive market. For example, for Canada to get the hub-and-spoke economy of scale they may need to develop lesser competition.
Competition Policy study Center
The last fifteen years has seen Japan incur several changes gradually in its industry. Years back in the 1986, air routes had regulations. Looking at Japan Airlines (JAL), the International routes were covered included also the domestic major routes which was served also by All Nippon Airlines (ANA) its competition. Both ANA and Japan Air System (JAS) covered domestic local routes although the individual routes and flight capacity was subject to approval. There was also strict regulation of airfare according to the approximation of the route distance.
During the year 2003, the airfares were variable just like those in the U.S. although they were approximately appropriate to the distance. Day of the week, season, day, and most important the competitions in the route are the various reasons why there are fluctuations or differences in airfares. Apart from the difference in airfare, there has been increase in airlines in the market this is so because of the deregulation. This has led to more competition in both the domestic market and major international routes.
Most major countries airlines have been failing in business and most are being restructured now. The increase in the landing charges increased the airfare for JAL and ANA to cater for the charges although it was going to affect the customers. However the Japanese Transport Minister, refused the proposal saying that the increased charge should be obtain by efforts of the management JAL and ANA retaliated by saying they would defer the increase of airfare by two mouths. Although it seemed the Ministers deny of JAL and ANA to raise fare was due to the cost increases.
In the year 2002, JAL and JAS focused on how they could become as one. The international market could not be interfered with this move. This move was to pose a challenge to ANA thus changing the competitive domestic market. On the fifteenth of 2002, it was brought to notice by the Fair Trade Commission of Japan (FTCJ) that most companies would loose market and collapse. For this reason the collaboration between JAL and JAS will benefit them much on the profits because of there own price decision making. In addition, competition would reduce due to the reduction of other competing flights. The merge between JAL and JAS could bring congestion in the airports this denies the airplanes there rights and check in to counter space. Finally, the FTCJ rounded it up and found out that after all of that, the consumers were the ones suffer (Ito, 2003). Later JAL and JAS forwarded a revised proposal to FTCJ, which was satisfactory and was accepted. The names of JAL and JAS remained, there routes were rearranged to divide the market and they were under the common stock holding company.
Another airline to enter the competitive market was Air Do (ADO). ADO had a lot of difficulties coping up with the competition, in that it led close to its failure. Though ADO was almost stopping its services, ANA offered to assist. Through affiliation a code number on ADO flights, purchases of seats in ADO flights helped in the maintenance of its flights. The merge and affiliation, lead to a reduction between the competing airlines.
The next airline to enter the market in 1998 was Skymark Airlines. After two years, Skynet Asia Airways (SNA) enter plied ed the market for routes between Tokyo-Miyazaki. Getting into the market with a lower price developed competition to the other airlines. Due to that competition, it led to the reduction of airfare in the routes that JAL, JAS and ANA airlines shared with SNA. In order to remain in the market, JAL, JAS and ANA proved competitive by placing offers and discounts to the routes SNA entered. Although there was high competition in the market and the reduction of airfares increased, FTCJ felt it wise that the price reduction could violate the prohibition of monopoly. Though the most used and convincing technique to win the market over the competitors was reducing the price benefiting the consumers, that was not the case. An alarm was raised and immediately caused an impacted leading to increase in the airfares. To survive competition in the airline market by new entrants requires the implement of the competition policy and pressure in the market. This can be done through fair competition. Example of unfair competition include, reducing the discount airfare, this reduces competition in the air routes.
In the European Airlines, does Multiple Competitions lead to a decrease in competitive pressure
Multiple competitions may reduce competition in the market. The competitive pressure may not happen or might level it all depends on the situation. The competitive pressure may not be felt if there is no existence of credible potential competitors to challenge back. According to the theory of multipoint, the fact of Mutual Forbearance (MF) might reduce the pressure of competition between the two industries. Multipoint competition may be said to be meeting same rivals in different regions or areas. (Renaud, M et al. 2007). Most people came into an agreement that during certain times, multipoint competition may bring up MF and to better production. Saddlers result puts the multimarket as equal if all the sections were similar.
Although Mutual forbearance suggests that the rate of rivalry between the multimarket competitors becomes weak, there will be increase in the multimarket thus reducing the aggressiveness of both the competitors. There is a possibility of a firm to diminish, this may bring about an increase in multimarket contacts thus reducing the aggressiveness of the competitors or Vis versa. The result of the MF behaviour, multimarket firms can tend to be more aggressive towards single or a few markets. Also due to the familiarity between airlines to multipoint competition, it may trigger attacks against rivals who meet in the market.
In the competitive market, it is rear to find new airlines joining. Reason being there are multimarket contacts between airlines thus for new airlines to enter, multimarket contacts should be low. Maintaining competition is a heavy task but some how an airline might accept some other airlines certain opportunity like offering use of landing slots to them, letting them use certain facilities in the terminal building this for a while may invite other airlines to enter and thus maintain competition.
Conclusion
In order to have fair and just competition, the airline must follow and adhere to the regulation and conditions put for them. Practicing what has been stated, example FTCJ cautioning airlines not to reduce there airfares will help maintain competition in the market and avoid the new airlines to enter and exit at there own will. Competition also involves how aggressive and loyal the airlines are. The more aggressive an airline is, the possibility of it with standing the competitive market becomes high. In addition, if the airlines management understands the various policies, it will also contribute to its performance in the market.
The introduction of multiple airlines has brought different changes in the competitive market. One can say that the market has increased in the rate of competition for those who have the better quality services and flights while others can say that the market has been stabilised. To win the market, the airlines must offer the best services, always be time cautious the exit and entrance of airlines must be speculated and met on time. The flights must also have a reasonable price or airfares that every person can be comfortable. If the airlines can respond positively to these problems then they may end up being the market leaders in the competitive market.
In the increase of multipoint competition, familiarity of airlines could trigger attacks against the competing rivals who meet in the market. Of late airlines run on there own putting there own prices and domestic routes according to the market condition although the non-market mechanisms still controls the boarding gate. The frequent changes in profit mostly in the U.S. has not brought any difference in growth i.e., there has been a steady growth, decreasing prices, and less concentration.