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Justice Department Airline Merger Policy

Justice Department airline merger policy is developed within the context of the Federal Aviation Act, in which there is an unusually explicit reliance on competition as a means of fulfilling statutory goals. The economics of the airline industry appear to indicate that low concentration and vigorous competition are particularly viable and desirable. Several factors, including existing regulatory policy, create incentives for airlines to merge whether or not an individual merger promotes or conflicts with the public interest. Specific benefits to the public should be identified and shown to clearly outweight the detriments, including adverse competitive impact, in order for airline mergers to be approved.

Farmer, D. A.↗

The Study of Airline Merger and Acquisition in the Great China Area

The Asian financial crisis in the late 20 th century has some long lasting effect on the air transportation industry in Asia, especially in the Great China Area. Starting from 1998, airlines in both China and Taiwan suffered some serious financial losses due to the diminishing travel demand caused by the economic recession. Airlines were forced to cut price to attract passengers and hence crashed the market discipline. A number of airline mergers and acquisitions were then driven by the markets and the governments. After China and Taiwan have both entered the World Trade Organization, some mega-merging cases were finalized in late 2002 for better fitting the world's aviation competitions. This paper reviews the nine merging and acquiring cases in the Great China Area in the past 5 years. Almost all the airlines in the area were involved. The new groups of airlines and the survival airlines are introduced. Market response to the airline mergers will also be examined. A general look over the performance of the new airlines will be discussed. And the future of the market will also be analyzed. Finally, the practices and the impacts of current inter-state mergers in the Great China Area will be examined. The study has expected a highly concentrated domestic market in both China and Taiwan. Each of the market will be dominated by three major airline groups of their own. Cross-holding equity within these 6 leading aviation groups would also be possible after further deregulations.

Shon, Zhengyi↗

Department of Transportation Merger Policy

The policy of the Department of Transportation with respect to evaluating airline mergers is discussed. The subjects presented are: (1) statutory responsibilities of the Department of Transportation, (2) interrelationship of airline merger policy and overall airline policy, (3) executive branch criteria for domestic airline merger proposals, and position of Department of Transportation on several merger proceedings.

Gillick, J.↗

The Conference Proceedings of the 2001 Air Transport Research Society (ATRS) of the WCTR Society

The ATRS held its Annual conference at Jeju Island, Korea in July 2001. The conference was a success with nearly 140 participants including 70 presenters. This report contains presentations from Volume 1 on the following: Airline and Travel Agent Relationships in Asia;Benchmarking Aviation Safety in the Commercial Airline Industry;Impact of Frequent Flyer Program on the Demand for Air Travel; Application of Genetic Algorithm on Airline Schedule;The Effects of Dual Carrier Designation and Partial Liberalization: The Case of Canada;Defense of Air Carriers and Air Agencies in FAA Enforcement proceedin gs - Damage Control Before the Case Arises; Cost Incentives for Airline Mergers? - An examination on the cost impact of U.S. airline mergers and acquisitions;Airport Regulation, Airline Competition and Canada's Airport System; Airline Competition: The Case of Israel's Domestic Doupoly; Non-Financial Indicators of Airline Distress: A Conceptual Approach;and Airport Privatization: An Empirical Analysis of Financial and Operational Efficiency.

Lee, Yeong-Heok↗

One Airline's View of Mergers

Specific cases of airline mergers are discussed to show the legal aspects involved and the procedures followed. The effects of the mergers on the airlines involved are analyzed. The impact of the mergers on management, personnel, and the overall airline operations is reported.

Colodny, E. I.↗

The Conference Proceedings of the 1997 Air Transport Research Group (ATRG) of the WCTR Society

This paper covers topics such as: Safety and Air Fares; International Airline Safety; Multi-fare Seat Allocation Problem; Dynamic Allocation of Airline Seat Inventory; Seat Allocation on Flights with Two Fares; Effects of Intercontinental Alliances; Domestic Airline Mergers; Simulating the Effects of Airline Deregulation on Frequency Choice; and Firm Size Inequality and Market Power.

Oum, T. H.↗

Human factors of flight-deck checklists: The normal checklist

Although the aircraft checklist has long been regarded as the foundation of pilot standardization and cockpit safety, it has escaped the scrutiny of the human factors profession. The improper use, or the non-use, of the normal checklist by flight crews is often cited as the probable cause or at least a contributing factor to aircraft accidents. An attempt is made to analyze the normal checklist, its functions, format, design, length, usage, and the limitations of the humans who must interact with it. The development of the checklist from the certification of a new model to its delivery and use by the customer are discussed. The influence of the government, particularly the FAA Principle Operations Inspector, the manufacturer's philosophy, the airline's culture, and the end user, the pilot, influence the ultimate design and usage of this device. The effects of airline mergers and acquisitions on checklist usage and design are noted. In addition, the interaction between production pressures and checklist usage and checklist management are addressed. Finally, a list of design guidelines for normal checklists is provided.

Degani, Asaf↗

Journal of Air Transportation, Volume 11, No. 1

Topics covered include: Analysis of System-wide Investment in the National Airspace System: A Portfolio Analytical Framework and an Example; Regional Air Transport in Europe: The Potential Role of the Civil Tiltrotor in Reducing Airside Congestion; The Development of Jomo Kenyatta International Airport as a Regional Aviation Hub; Corporate Social Responsibility in Aviation; The Competitive Effects of Airline Mergers and Acquisitions: More Capital Market Evidence; and The Competitive Position of Hub Airports in the Transatlantic Market.

Bowen, Brent↗

A Critique of Cab Regulatory Policy

The regulatory policies of the Civil Aviation Board are discussed. The objectives of the Civil Aviation Board are defined. Specific actions of the Civil Aviation Board with respect to passenger fares, rate levels, and load factors are presented. The decisions on successful and unsuccessful mergers of airlines during the 1938 to 1972 time period are analyzed. Tables of data are presented to show the economic aspects of airline operations during 1955, 1960, and 1970.

management methods↗

Mergers and Anti-trust Issues in Recent CAB Cases

The airline industry is surveyed-particularly domestic trunklines-in relation to collective approaches to industry concerns. These actions are classified by the apparent degree of anti-trust issue present. Recent route merger cases are considered from the CAB staff viewpoint.

airline mergers↗

The Conference Proceedings of the 1997 Air Transport Research Group (ATRG) of the WCTR Society

Topics reported in the proceedings are: (1) Liberalization of Asia-Pacific aviation; (2) Financial analysis of a British Airways/USAir Merger; (3) Strategic alliances in the airline industry; (4) Effect of strategic alliance on performance; (5) Advances, impediments and impacts in an international open skies regime; and (6) Canadian carrier strategies and the 1995 open skies agreement.

Oum,Tae Hoon↗

Industry Consolidation and Future Airline Network Structures in Europe

In the current downturn in demand for air travel, major airlines are revising and rationalizing their networks in an attempt to improve financial performance and strengthen their defences against both new entrants and traditional rivals. Expansion of commercial agreements or alliances with other airlines has become a key reaction to the increasingly competitive marketplace. In the absence, for regulatory reasons, of cross-border mergers these are the principal means by which the industry can consolidate internationally. This paper analyzes the developments which have been taking place and attempts to itentify the implications for airline network structures and the function of different hub airports. The range of services available to passengers in long-haul markets to/from Europe is evaluated before and after recent industry reorganization. Hubs are crucial to interlink the route networks of parmers in an alliance. However, duplication between nearby hub airports that find themselves within the same airline alliance can lead to loss of service at the weaker locations. The extent to which the alliance hubs in Europe duplicate or complement each other in terms of network coverage is assessed and this methodology also enables the optimal partnerships for "unattached" airlines to be identified. The future role of the various European hubs is considered under different scenarios of global alliance development. The paper concludes by considering possible longer-term developments. In an environment where the low-cost carriers will provide a major element of customer choice, it is suggested that the traditional airlines will retrench around their hubs, surrendering many secondary cities to the low-cost sector. Further reduction in the number of alliances could threaten more of the European hubs. For both regulatory and commercial reasons, the end result may be just one airline alliance - so recreating in the deregulated market the historic rule of IATA.

Dennis, Nigel↗

Multiple Hub Network Choice in the Liberalized European Market

A key question that so far has received relatively little attention in the germane literature is that of the changes at various airports as a result of the EU liberalization policies. That is, presently, most major European airports still benefit from the so-called home-carrier phenomenon where the country's publicly or semi-publicly owned carrier uses the country's main airport as its gateway hub and, consequently, the home-carrier is also the principal user of this airport (in terms of proportion of total aircraft movements, number of passengers transported, connections, slots ownership, etc.). The country's main airport has substantially benefited from these monopoly conditions of airline captivity, strongly determined by the bilateral system of international air transport regulation. Therefore, European major airports were used to operate in essentially different markets, compared to the increasingly competitive markets of their home based carriers. This partly explains relative stability of transport volumes and financial results of European major airports compared to the relatively volatile financial results of most European national airlines. However, the liberalization of European aviation is likely to change this situation. Market access is open now to all community carriers, i.e. carriers with majority ownership and effective control in the hands of EU citizens. Ticket prices are free, governments can only intervene in case of dumping or excessive pricing. A community airline can choose its seat in any of the 15 member states. Licensing procedures are harmonized between member states. In the last few months community carriers have had unrestricted route access within the EU. Most probably this development will be extended to countries inside and outside Europe. Last year the European Commission got the mandate to start negotiations with 10 other European countries. In the meantime the EC has also started negotiations with the USA on so-called soft rights. In the meantime, open skies agreements have been concluded between the USA and most of the EU member states to facilitate strategic alliances between airlines of the states involved. As a result of this on-going liberalization the model of the single 'national' carrier using the national home base as its single hub for the designated third, fourth and sixth freedom operations will stepwise disappear. Within the EU the concept of the national carrier has already been replaced by that of the community carrier. State ownership in more and more European carriers is reduced. On the longer run mergers or even bankruptcy will further undermine the "single national carrier - single national hub" model in Europe. In the meantime, strategic alliances between national carriers in Europe will already reduce the airlines' loyalty to a single airport. Profit maximization and accountability to share holders will supersede the loyalty of these newly emerging alliances, probably looking for the opportunities of a multiple hub network to adequately cover the whole European market. As a consequence, some European airports might see a substantial decline in arriving, departing and transfer traffic, thus in revenues and financial solvency, as well as in their connection to other inter-continental and intra-European destinations. At the same time, other airports might realize a significant increase in traffic as they will be sought after by the profit maximizing airlines as their major gateway hubs. Which will be the losing airports and which will be the winning ones? Can airports anticipate the actions of airlines in deregulated markets and utilize policies which will improve their relative position? If so, what should be these anticipatory policies? These questions become the more urgent, since an increasing number of major European airports will be privatized in the near future. Although increasing airport congestion in Europe will also be reflected in a growing demand pressure for airport slots, this is not a guarantee for a stable transport volume growth of individual airports. The more volatile the market is, the more vulnerable privatized airports become. Therefore, the main issue of this study is the analysis of the opportunities of major European airports to become a central hub as a result of the network choices made by the new European airlines in a completely liberalized market. In a previous study (Berechman and de Wit, 1996), we already explored the potential of Amsterdam Airport Schiphol of becoming the major West-European hub, once European aviation markets are deregulated. A major hindrance of that study was the use of a single hub-and-spoke network. For example that model could not analyze the viability of different combinations of European hubs within a multiple hub network of alternative airline alliances. In this study, we have formulated the model of a multi-hub network where two West-European airports are used for inter-continental and intra-European travel to enable a more realistic analysis of hub choice. Like the previous one also this multi-hub model is primarily used to assess the potential ability of Amsterdam Airport Schiphol for becoming a major West-European hub. Thus, in particular, the policy tests focus on this airport in a double hub network.

Berechman, Joseph↗

Determinants of Market Structure and the Airline Industry

The general economic determinants of market structure are outlined with special reference to the airline industry. Included are the following facets: absolute size of firms; distributions of firms by size; concentration; entry barriers; product and service differentiation; diversification; degrees of competition; vertical integration; market boundaries; and economies of scale. Also examined are the static and dynamic properties of market structure in terms of mergers, government policies, and economic growth conditions.

Raduchel, W.↗

The Competitive Position of Hub Airports in the Transatlantic Market

This article puts forward the argument that the measurement of connectivity in hub-and-spoke networks has to take into account the quality and quantity of both direct and indirect connections. The NETSCAN model, which has been applied in this study, quantifies indirect connectivity and scales it into a theoretical direct connection. NETSCAN allows researchers, airports, airlines, alliances and airport regions to analyse their competitive position in an integrated way. Using NETSCAN, the authors analysed the developments on the market between northwest Europe and the United States (US) between May 2003 and May 2005. One of the most striking developments has certainly been the impact of the Air France-KLM merger and the effects of the integration of KLM and Northwest into the SkyTeam alliance on the connectivity of Amsterdam Schiphol. Direct as well as indirect connectivity (via European and North American hubs) from Amsterdam to the US increased substantially. The main reason for this increase is the integration of the former Wings and SkyTeam networks via the respective hub airports. Moreover, the extended SkyTeam alliance raised frequencies between Amsterdam and the SkyTeam hubs (Atlanta, Houston, for example), opened new routes (Cincinnati) and boosted the network between Amsterdam and France. As a result of the new routes and frequencies, Amsterdam took over Heathrow s position as the third best-connected northwest European airport to the US.

Burghouwt, Guillaume↗