ABSTRACT
An important characteristic of the airline industry is that economies of scale are not considered to be present. This apparent fact, discussed in Chapter 2, makes the airline industry theoretically easy to enter. However, as will be discussed in this chapter, incumbent airlines have erected other barriers to entry that have been quite effective. In addition, infrastructure barriers have limited the availability of valuable scarce resources to new-entrants making competition less viable or simply impossible in many markets. When newentrants emerge in the form of new or expanding small carriers the staying power of the large incumbents is certainly a barrier to entry unless there are enforced rules to play by. In fact the ground-rules for the treatment of newentrants were paved before deregulation. The Chicago Midway 'Low Fare Route Proceeding' before the CAB, dealt with two new-entrants that had made an argument for a lead-time or a protected corridor, against competition by the incumbents. In this case the CAB ruled that (CAB order 78-7-40, p. 5)
A dissenting member of the Board, O'Melia, found on the contrary, a reason to exclude incumbents from Chicago's Midway airport and, what is more, from matching the new-entrant's fares for one year in order to protect them.6
