The Airline Industry Consolidation Act of 1992

 The Airline Industry Consolidation Act of 1992

               The airline industry has been reformed by the Airline Industry Consolidation Act of 1992. This act has been a significant contributor that has enabled the extension of networks. For this to take place and enable the extension of their services, boost market shares, and lower their costs, the act authorized airlines to merge, create alliances, and enter into code-sharing arrangements (Peters 2006). This made airlines more effective and competitive, which increased competition and brought down ticket rates. The Act also permitted airlines to form joint ventures in which they could pool resources including people, maintenance facilities, and aircraft. Through merging big airlines, the employees have a big say in potential mergers than in the past. Due to these cost- and efficiency-cutting measures, airlines were able to boost their profitability and offer more affordable rates. Also, the Act permitted airlines to enter into interline agreements, enabling them to provide passengers with a wider selection of destinations. The Act additionally permitted airlines to contract with other airlines to offer connecting services, enabling customers to travel between two locations without changing flights. The 1992 Airline Industry Consolidation Act had a significant role in the restructuring of the aviation sector, and it still has an effect today. The airlines may believe that if they don't defend themselves through consolidation, they won't be able to compete with the massive alliances that would emerge (Borenstein 1992). Hence, even if the airlines did not merge, their profitability might drop by so much that layoffs would still occur. Even worse, the new combinations that would emerge would drive independent airlines into bankruptcy.

References

International Civil Aviation Organization (ICAO), Convention on Civil Aviation ("Chicago Convention"), 7 December 1944, (1994) 15 U.N.T.S. 295, available at: https://www.refworld.org/docid/3ddca0dd4.html [accessed 16 February 2023]

International Civil Aviation Organization (ICAO), The history of ICAO and the Chicago Convention. The History of ICAO and the Chicago Convention. (2011). Retrieved February 15, 2023, from://www.icao.int/about-icao/history/pages/default.aspxLinks to an external site.

Peters, C. (2006). Evaluating the performance of merger simulation: Evidence from the US airline industry. The Journal of law and economics, 49(2), 627-649.             https://www.econstor.eu/bitstream/10419/23462/1/CSIO-WP-0033.pdf

Borenstein, S. (1992). The evolution of US airline competition. Journal of Economic Perspectives, 6(2), 45-73. https://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.6.2.45