The Market for Air Passenger Operations: Contestable Market or…?

Abstract

Based on the results of the survey of Russian airline companies, the article analyzes the main barriers to entry in this industry. The authors show the existence of substantial structural, technologic and behavioral barriers to entry that raises doubts concerning the applicability of the contestable markets hypothesis to this type of markets. The empirical estimation of the height of the barriers to entry shows that experts regard administrative barriers as the most important for limiting competition. In some regions there is a unified structure of ownership or affiliation "airport-airlines company" and this accounts for high level of market concentration and artificial monopolies. The article shows the contradictory relationship between these kinds of ownership and public welfare. The authors also study the ways of transcending the barriers to entry and come to the conclusion (using econometric techniques) that the most efficient way to transcend them in the air passenger operations industry is franchising.