Competition versus Predation in Aviation Markets

Chapter 6Predation in Aviation: The North-American Divide

David W. Gillen and Ashish Lall

1. Introduction

The aviation industry continues to be in a state of upheaval as emerging business models are buffeted by external shocks. Largely, this has been due to factors such as the events of September 11, 2001 and the subsequent wars in Afghanistan and Iraq. Heightened security concerns and more recently, SARS have led to declining profitability. Changes in the industry landscape however, preceded these events. In the domestic United States prices of air travel have declined by more than 50% since deregulation in 1978. Low cost carriers continue to successfully challenge full-service incumbents even in Canada where a single carrier dominates domestic ...