In fact, Alaska Air beat out its nearest competitor, JetBlue, to buy Virgin America, to become now the fifth-largest airline in the U.S., after American Airlines, Delta Airlines, United Airlines, and Southwest Airlines. The new combined airline will retain Alaska Air's brand, and will have about 18,300 employees and 280 aircraft, with its major bases in cities such as Seattle and San Francisco.
The airline industry, at least in the U.S. domestic market, has the characteristics of an oligopoly, which we have been learning about in class, as it has 4 airlines that dominate the market with 61.1% of the market share, many passengers, and generally standardized flights. In addition, the big airlines also has more control of prices, and airlines have less freedom to enter or exit the market, especially because of the high price of starting an airline. As a result, passengers have less choice between airlines to find cheaper prices. Some of this is a result of deregulation of the airline industry in 1978, with the passage of the Airline Deregulation Act of 1978. This act initially led to increased competition, greater efficiency, and lower prices. However, starting in the past decades, airlines have started merger, which has resulted in less competition.
It's unclear as of now what effect this merger will have on the airline industry and prices for consumers and whether or not the Justice Department will be looking into the merger, but airlines seem to be trending towards more mergers, larger airlines, and less competition.
What effect do you think this merger will have on the airline industry and on consumer prices?
Do you think the Justice Department will look into this merger?
In the case of the airline industry, deregulation has both increased competition at times and decreased competition at times. In general, do you think deregulation of industries is a good idea?