ENTRY BARRIERS AND ANTI-COMPETITIVE BEHAVIOUR IN A DEREGULATED AIRLINE MARKET: THE CASE OF CANADA

This paper tries to explore the potential for anticompetitive behaviour in Canadian airline markets arising from barriers to entry. According to the "market contestability hypothesis", it is the absence of entry (and exit) barriers that determines whether or not markets are contestable. Markets with entry barriers are less contestable and thus provide better opportunity for predation and subsequent monopoly behavior. The focus here is on the entry barriers themselves, rather than on the types of predatory behavior they elicit. Because of a number of recent innovations in the industry, this paper will further focus its attention on product differentiation as a barrier to entry. After a brief summary of the traditional and new literature on barriers to entry the paper examines potential entry barriers such as frequent flyer programs, travel agent buying power, computer reservation systems, airport access and shared designator codes. "Hubbing" and the strategic choice of network and service levels are also assessed, and how these are affected by the above issues.