ABSTRACT
Economists usually describe the certificated airline industry as closely approximating an oligopolistic market structure. With the general characteristics of oligopolies as a background, this chapter shows how the airline industry compares and then take a look at several unique characteristics. Like all oligopolists, airlines must achieve a large volume of output in order to lower the cost per unit of output (which equals either a seat departure or a seat mile flown as sector length matters too in the concept of economies of scale). Another clear characteristic of oligopolists in general, and airlines in particular, is growth through merger. It is a major factor in explaining the small number of firms. Regardless of the means by which an oligopoly evolves, rivalry among a small number of firms clearly interjects a new and complicating characteristic: mutual dependence.
