Airline Competition

Industry Competitive and Financial Problems Gao ID: T-RCED-92-28 February 21, 1992

GAO testified that the most appropriate approach to resolving the competitive and financial problems of the airline industry is to focus on long-term strategies to enhance competition. Government action by itself, of course, will not preserve a competitive industry. If airlines are not soundly financed, they will remain vulnerable to the cyclical swings of demand for airline services and costs of aviation fuel. Nevertheless, a well-designed, broad program to reduce competitive barriers should both improve the long-term financial status of distressed airlines and make them more effective competitors in the airline marketplace. Government action can provide the structural preconditions for effective competition: equal access to the nation's publicly financed airports, a level playing field for marketing airline services, and better access to domestic and international capital markets. The government's interest in the survival of threatened airlines is one of ensuring that enough airlines survive to provide effective competition.

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