COMPETITION IN EUROPEAN AVIATION: PRICING POLICY AND MARKET STRUCTURE. IN: AIR TRANSPORT

Abstract

This study analyzes the impact of liberal bilateral agreements on some European air routes in terms of price competition and market structure. A model is proposed that explains firms' behavior and shows that, after liberalization, firms exploit their cost advantages and differentiate their products more, but market structure still depends on access to airport facilities and other ancillary services controlled by the flag carriers. These results suggest that even if liberal bilaterals have increased competition in the short run, they do not ensure a fully competitive framework in the European aviation industry.