Barriers to Competition in the Airline Industry

T-RCED-89-65: Published: Sep 20, 1989. Publicly Released: Sep 20, 1989.

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GAO discussed its review of how airline operating and marketing practices could impose barriers to market entry for new or existing carriers. GAO noted that: (1) exclusive-use gate leases enabled incumbent airlines to prevent entrants from providing competitive service at existing gates; (2) some incumbent airlines' general use agreements allowed them to prevent new gate construction; (3) noise restrictions barred entry or raised entry costs at some airports; (4) some airports' density rules limited the availability of airport take off and landing slots for new entrants; (5) airline-owned computerized reservation systems, frequent-flyer plans, and bonus commissions for travel agents increased airlines' flight volumes; (6) code-sharing agreements which automatically connected jet and commuter carrier flights increased participating airlines' flight volumes; and (7) some airline practices which discouraged competition and new market entry also had such positive effects as cost reduction and noise control. GAO also noted that alternatives for reducing some practices' anti-competitive potential included: (1) abolishing airlines' long-term control over gate leases and slots; (2) reducing federal restrictions making airports dependent on airline revenues; and (3) exploring noise control strategies that minimized adverse effects on competition.

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