Effect Of New Security Regulations On Airline Concentration

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Master of Arts

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An entire set of new airport security regulations were implemented globally after September 11, 2001 terrorist attack on U.S.A. The effect of these new security regulations on competition level of airline industry is analyzed here for international flights arriving and departing from American airports, using enplanement data from 1990 to 2000. It is found here that, new regulations slightly reduced the competition level of the airline industry. However, the change is very subtle. Additionally, these new regulations helped some airline organizations to manipulate the market in their favor. In the forth quarter of 2001 the monopoly rate suddenly and unusually went up around the world. However, the situation persists for only one quarter and this particular issue was resolved from 2002 only. It is proposed that in the oligopoly market the big airline firms were able to use economies of scale, in various forms, to gain market share immediately after the terrorist attack.