Airline Competition:

Industry Competitive and Financial Problems

T-RCED-92-28: Published: Feb 21, 1992. Publicly Released: Feb 21, 1992.

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GAO discussed problems with competition in the airline industry and the effect of the industry's financial problems on competition. GAO noted that: (1) the degree of concentration of airlines in certain areas has affected fare increases and decreases; (2) financial weaknesses of several large airlines could lead to additional failures and more industry concentration; (3) slot restrictions that limit airport access, limited access to airport gates and facilities, and existing airlines' use of frequent flyer plans, computerized reservation systems, travel agent commissions, and agreements with other airlines for connecting flights constitute barriers to competition and the entry of new airlines; and (4) airlines' heavy reliance on debt financing and federal restrictions on airlines' access to foreign capital serve to weaken airlines' financial positions. GAO believes that the most appropriate approach to resolving the competitive and financial problems of the airline industry is to focus on long-term strategies to enhance competition.

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