- High entry barrier, it takes a lot of capital to setup an airline business.
- Firms are identical in terms of product, most airlines operate from same terminals and similar airplanes with similar flight times.
- Price discrimination is usually achieved through segmenting customers based on time of purchase of tickets, type of ticket (refundable, non-refundable, economy, business) etc.
- Operating costs such as airline ticket counters, airline staff (pilots, attendants, scheduling and operations) is highly symmetric across airlines and there is a good chance these costs will push down when companies merge. The existence of airline partnerships across the globe is one such measure to reduce these operating costs.
- Owing to long gestation periods and break-even point, companies try to secure profits by mergers and alliances to avoid bankruptcy and secure cash-flow for operations. In this case both AA and US airways argument was that this merger is beneficial to secure their failing future.
Several articles discusses this issue and its impact on different parties including: