ABSTRACT
This chapter looks at what is meant by predation, evidence of it among US airlines, how established airlines can use their computer reservations systems as tools for responding to competition, and implications for Australia. Predation involves a company deliberately pricing below marginal cost on certain routes and carrying a loss until it has driven a rival on those routes out of business, after which it again raises prices to a monopoly level. In the case of airlines, predation is made easier by the ease of obtaining information. A newcomer's services, fares and other details are known in advance. Good airline practice includes sophisticated revenue management systems, earlier called yield management systems, linked to computer reservations systems. The aim of revenue management is to maximize revenue per flight by achieving two objectives which sometimes conflict: to get the highest average fare ('yield') possible and to fill a high percentage of the seats.
