Current domestic passenger air carriers are a much changed collection of firms r

Question

Current domestic passenger air carriers are a much changed collection of firms relative to, say, a generation ago. Gone are Pan American, TWA, Eastern and Braniff. Merged carriers include America West and US Air to make US Airways, and under consideration today, the joining of Delta and Northwest Airlines. Upstarts like Jet Blue, Southwest, Virgin, Midwest Express, and Trump have proven able entrants into specialized, regional, and /or niche markets. But, in summary, a few, maybe 10 or so, large air carriers dominate the nationwide domestic market with small markets like Sioux City IA, Fort Dodge IA, Lincoln NE, West Lafayette IN, and Moline IL wondering

Explanation / Answer

It is clear from the above that there is space for all kinds of airlines-big and niche ones. Each one is doing wel after having found its own kind of customers and segments to cater to. So one recommendation is that the govt needs to do nothing as the market size is large enough to accommodate many players. In fact there must be no limits on more entrants as this fosters competition making companies more efficient and cost conscious. Prices are also lowered due to tough competition.

From society point of view it must be ensured that safety is not sacrificed for profits and competition. In this regard, the required safety regulations must be imposed strictly. any violation must attract the highest punishment so that it acts as a deterrent to others. Safety must not be compromised.

The above ques states that prices are high. One way to reduce them is to lower taxes on air travel. second, high process can be lowered with more competition, and creating incentives for new firms to enter this industry. Third, the govt must ensure that no collusion between operators occurs that allows them to ‘fix’ high prices. A close eye on the prices must be kept and any any ‘cartelisation’ must not be allowed. The regulation must not allow firms to collude and keep prices from behaving in line with demand and supply conditions.

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