Entry and Competition in the U.S. Airline Industry: Issues and Opportunities -- Special Report 255

TRB Special Report 255 - Entry and Competition in the U.S. Airline Industry: Issues and Opportunities focuses on some well understood and recognized opportunities to encourage airline competition, especially in larger markets. During the mid-1990s, new-entrant carriers filed formal complaints with USDOT, contending that large established airlines were engaging in predatory pricing (pricing below cost). Such strategies were alleged to include matching low fares and providing far more service than could a new entrant, but then raising fares and cutting service as soon as the new entrant failed or withdrew. USDOT contemplated writing regulations against such alleged practices, but the committee that studied entry and competition in the U.S. airline industry advised against doing so. Given the difficulties involved in defining fair and unfair competition, the proposed regulations could have proved as harmful as helpful. The committee noted that USDOT has other policy instruments that could be used to promote the entry of new carriers, such as supporting the development of additional gates and airports, eliminating service restrictions at some key airports, and ensuring that federal rules promote rather than hinder more open access to major airport facilities.