Premium #158 – Competition, Trust Busters and Barriers to Entry

The recent drop in oil prices has not resulted in an equivalent drop in air fares, as airlines are attempting to keep additional profitability from lower costs whenever they can. Perhaps the most egregious indication of this trend is Qantas, which eliminated its fuel surcharges, only to raise its normal fares to the same level as with the fuel surcharges.

So while many of us enjoy the impact of $1.69 gasoline for instead of $3.69, when we book flights we find equivalent savings not being passed on. This type of behavior is what is expected when an economic oligopoly exists, and a handful of carriers, through merger and acquisition, become dominant players in the industry.