The fear of destructive market competition and abandonment of peripheral areas led policy makers to regulate tightly the airline industry on both domestic and international routes in the aftermath of the Second World War. Nonetheless, the resulting financial inefficiency and customer dissatisfaction as well as the presumed low barriers to market entry and exit induced subsequent liberalisation, first in the USA (domestic market deregulation in 1978) and then in the European Union (completion of a Single European Aviation Market in 1997). Nonetheless, the process of market liberalisation is far from completed. Although internal markets in many countries now operate freely, the international aviation regime is still based on bilateral agreements which are occasionally very restrictive.

In spite of the tragedy, the events of 9/11 may bring further market developments, as they revealed the inflexibility of the current system to address crises in an effective manner. The European Commission is currently trying to secure the power to negotiate air traffic rights for all its member-states collectively. A potential success will signify the move towards a multilateral aviation framework and perhaps the creation of a Transatlantic Common Aviation Area, following an open-skies agreement between the US and the EU. This will probably have a snowball effect in other countries that will seek to replicate liberal policies. As a result of subsequent privatisation, mergers and acquisitions, a truly global airline industry may then emerge characterised by the prevalence of few transnational carriers. Therefore, the competition authorities should...