TABLE OF CONTENTS One of the most striking results of deregulation is the impetus it gave to the level of activity in airline mergers and acquisitions. The constraints imposed in inter-governmental air service agreements, and the restrictions placed on ownership, meant that most of this activity took place within national boundaries.
The highest level of activity had been in the United States where, as discussed in Chapter 3, deregulation led to some considerable restructuring of the industry. Deregulation first appeared to encourage a lot of new entry, but later a wave of mergers and acquisitions left the industry somewhat more concentrated than it was before.
The history of merger activity in the deregulated US industry is charted in Table 7.1. The flurry of activity in the early years of deregulation did cause some concern over increases in market power, but it was thought then that the impact was likely to be rather small. While responsibility for merger control remained with the Civil Aeronautics Board and the Department of Justice a fairly cautious approach was adopted; and in the late 1970s the competition authorities did in fact block a number of proposed mergers (such as that between Eastern and National and that between Continental and Western) because of the potential harm to competition. But then there was a substantial wave of mergers in the middle of the 1980s, leading to a sharp increase in industry concentration. In 1984 15 carriers accounted for 90 per cent of the...
