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Oligopoly of the Airline Industry Report

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Updated: Jun 20th, 2020

Introduction

Modern world is characterized by great rivalry. There is a tendency in society that to survive a person should be the best in his sphere. The same deals with world economy. There is a great number of different companies in the world which are trying to become successful and find their place on the market. However, only few of them can really become very important and successful. Destiny of the rest of companies is unenviable. They would collapse. That is why modern world market is occupied by several large companies which are trying to dominate and destroy their rivals, leaving no chance for a small company to survive.

Main body

General characteristics of oligopolies

Under current conditions it is possible to talk about special kind of a market structure which is characterized by dominancy of a small number of leading companies (Oligopoly, n.d). This kind of market structure is called oligopoly. It appeared as a result of a severe rivalry and only the most powerful companies managed to survive. This structure has its own characteristics. In general, it should be said that the main peculiarity of oligopoly is a high level of interdependence between companies dominating on market (Six essential characteristic features of oligopolistic market, n.d.).They have to take into account actions of other companies in order to be competitive. That is why it is possible to state another characteristic of oligopoly which is group behavior. There are also some elements of monopoly peculiar to these companies as they are dictating their terms to all market. Rigidity of prices is also an integral part of oligopoly.

Economic characteristics unique to the airlines

The airline industry is characterized by presence of a few number of companies which dictate their terms in this industry. It is a bright example of oligopoly. It is even possible to say that it has some monopolistic tendencies (OConnor, 2000). Due to this fact, the airline industry has its own unique economic characteristics. First of all, its seasonal character should be mentioned (Airline Economics, n.d.). The airline industry has great incomes in summer months, while winter months are less beneficial. Another unique peculiarity of this industry is a great cash flow which is traditional for airline industry.

Economic aspects that have led to the success of low fare airlines

Last decades are characterized by the world financial crisis. It touched all spheres of human life and all industries. The airline industry is not an exception. People decided to spend less money in order to save funds, that is why airlines suffered from decrease of incomes. Under these conditions, low fare airlines became very popular and successful. This fact can be easily explained by several reasons. First of all, it is the question of price as tickets are usually cheaper and people see tangible benefit in using these airlines. Second reason is connected with the previous one. People do not want spent great sums of money, paying for some extra services which are provided in some famous airlines.

Conclusion

Having analyzed the data, it is possible to come to certain conclusions. It should be said that the airline industry has tendencies to oligopoly. Moreover, it has its own unique peculiarities which influence development of this industry. It also should be mentioned that in terms of financial crisis low fare airlines obtained great popularity and became successful.

Reference List

. (n.d.). Web.

OConnor, W. (2000). An Introduction to Airline Economics. Santa Barbara, California: Praeger.

. (n.d.). Web.

. (n.d.). Web.

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