Airline Competition: Strategies for Addressing Financial and Competitive Problems in the Airline Industry

GAO discussed the airline industry's competitive and financial problems, focusing on the: (1) protection of U.S. consumer interests; and (2) future ability of U.S. airlines to compete in domestic and international aviation markets. GAO noted that: (1) over the last 3 years, the U.S. airline industry's losses totalled $10 billion; (2) three airlines accounted for two-thirds of the total losses and $2 billion in losses resulted from changes in airline retiree benefits liability recording methods; (3) five airlines have experienced reductions in their market shares, while the three largest airlines have increased their market share from 41 to 58 percent; (4) airline losses resulted from leveraged buy-outs, ill-timed expansions, limited access to capital to further competition and replace older aircraft, unlimited fare wars, liquidation actions by bankrupt airlines, and competition limitation which increased consumer costs; and (5) to combat the airline industry's financial and competitive problems, a national strategy should be implemented to provide U.S. airlines with access to capital markets by relaxing restrictions on foreign investment and control, enhancing access to the international market, reducing barriers to domestic and international competition, and examining claims regarding unfair airline pricing practices.