Airlines, Airports and Antitrust: A Proposed Strategy for Enhanced Competition

Authors

Robert M. Hardaway, University of DenverFollow
Paul Stephen Dempsey

Publication Date

1-1-1992

Document Type

Article

Organizational Units

Sturm College of Law

Keywords

Deregulation, Airline industry concentration

Abstract

Most of this country's major airports are monopolies or duopolies at which one or two dominant carriers control a high percentage of terminal facilities. Airlines have used this market power to raise fares on flights originating and terminating at such airports. Although this power has been gained in part through the process of buy-outs and mergers in the airline industry itself, it has also been gained through actions taken in concert with airport authorities, such as when agreements are entered into that effectively limit the availability of airport facilities to new entrants and other competitors. Airlines, by virtue of rights gained in their leases with airports, have achieved effective control, if not fee ownership of airport facilities. We submit that they are, therefore, subject to antitrust action under section two of the Sherman Act that makes it illegal to "monopolize, or attempt to monopolize . . . any part of trade or commerce."" Specifically, the airlines' monopoly power over airport resources should be broken up pursuant to the essential facilities doctrine, which provides that any company controlling an essential facility or a strategic bottleneck, violates the antitrust laws if it fails to make access to that facility available to its competitor on fair and reasonable terms. Although incumbent airlines have no general "duty to deal" with competitors (i.e., by subleasing gates or terminal space) they are, even according to such critics of the doctrine as Judge Posner, guilty of monopolization if they "refus[e] to cooperate with a competitor in circumstances where cooperation is indispensable to effective competition."'' It has been suggested that airlines should be permitted to earn oligopoly profits as a means of solving their chronic profitability problems, thus enabling them to obtain sufficient capital for new aircraft and equipment. It is true that the airline industry today is an oligopoly, which may in fact earn oligopoly profits. Whether that airline oligopoly itself should be broken up, or whether antitrust action should be taken to break up the airline industry itself is, of course, an entirely separate question not considered in this article.' What is clear, however, is that the earning of oligopoly profits through monopolization of such essential facilities as airports, is anti-competitive and results in a misallocation of resources. It is also a violation of antitrust laws.

Publication Statement

Copyright is held by the author. User is responsible for all copyright compliance.

Recommended Citation

Robert M. Hardaway & Paul Stephen Dempsey, Airlines, Airports and Antitrust: A Proposed Strategy for Enhanced Competition, 58 J. AIR L. & COM. 455 (1992).