Domestic airline concentration: A positive strategic trade analysis

This study questions the applicability of strategic trade theory to the world airline industry. The particular concern is whether domestic airline concentration involves strategic implications in terms of international airline market outcomes. Comprehensive panel data covering the international country-pair markets between 21 nations over the 1983–1992 period allows testing the impact of both home-nation and foreign-nation domestic concentration on the market-share of a national airline industry. The results support home-nation domestic concentration improving and foreign-nation domestic concentration decreasing the international competitive position of a national airline industry. Thus, the world airline industry does appear to manifest a rationale to consolidate domestic markets in order to enhance international competitiveness.