Sources of Economic Rent in the Deregulated Airline Industry

Bailey, Elizabeth E.; Williams, J.R.

doi:10.1086/467153

Cited by 91 publications

(33 citation statements)

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“…In sum, deregulation virtually requires that firms utilize their resource base differently to achieve scale and scope economies (Bailey and Williams 1988). While during regulatory times firms learn how to work with the regulatory agency, this knowledge has significantly less economic value after deregulation.…”

Section: Elimination Of Regulatory Controls On Market Share Deregulamentioning

confidence: 99%

A theory of change in turbulent environments: the sequencing of dynamic capabilities following industry deregulation

Pettus

Kor

Mahoney

2009

IJSCM

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The dynamics of change and the path−dependent evolution of resources and capabilities are central concerns of contemporary strategic management. This paper integrates the resource−based and dynamic capabilities literatures to explain why development of dynamic capabilities is especially important for firms that transition from regulated to deregulated environments. We develop a theoretical model and specific propositions concerning the pattern and sequencing of dynamic capability development within environments experiencing substantial change, specifically in newly deregulated industries. We discuss implications of the proposed theoretical model for both research and managerial practice. The dynamics of change and the path-dependent evolution of resources and capabilities are central concerns of contemporary strategic management. This paper integrates the resourcebased and dynamic capabilities literatures to explain why development of dynamic capabilities is especially important for firms that transition from regulated to deregulated environments. We develop a theoretical model and specific propositions concerning the pattern and sequencing of dynamic capability development within environments experiencing substantial change, specifically in newly deregulated industries. We discuss implications of the proposed theoretical model for both research and managerial practice.2

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Section: Elimination Of Regulatory Controls On Market Share Deregulamentioning

confidence: 99%

A theory of change in turbulent environments: the sequencing of dynamic capabilities following industry deregulation

Pettus

Kor

Mahoney

2009

IJSCM

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“…Resource Centrality (RC) is operationalized in terms of the airline-route reliance on the firm's important 'hub positions' in airports. Hub positions have been identified as critical resource commitments and sources of rents in this industry (Bailey and Williams, 1988;Borenstein, 1989Borenstein, , 1991. Strong positions in airports are costly to develop and difficult to redeploy, and provide local efficiency rents and market power advantages which are exploited in city-pair markets originating in that airport (Berry, 1990;Borenstein, 1989Borenstein, , 1991.…”

Section: Operationalization Of Spheres Of Influencementioning

confidence: 99%

Reciprocal threats in multimarket rivalry: staking out ‘spheres of influence’ in the U.S. airline industry

1999

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“…The Irish case of regulatory capture was more pronounced than elsewhere in Europe and the policy change in 1984/6 was therefore more dramatic. Airline opposition to deregulation because fares would not fall, Aer Lingus staff productivity was already high, thin routes would not be served and off-peak services would be withdrawn, proved to be exercises in rent seeking (Bailey and Williams, 1988). Kahn (1987), on the other hand, accurately predicted results of Irish airline deregulation.…”

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confidence: 93%

Exporting Deregulation - Alfred Kahn and the Celtic Tiger

Barrett¹

2008

Review of Network Economics

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Airline deregulation in Ireland arose from a parliamentary revolt in 1984 against legislation to imprison and fine those selling airline tickets below government approved fares. The revolt was heavily influenced by US airline deregulation in 1978 and the writings of Alfred Kahn. The results were spectacular. Dublin-London, deregulated in 1986, became the busiest international route in Europe. The 2.2m passengers on the Irish national airline before deregulation in 1986 increased to 72m passengers on four Irish airlines in 2008. Ryanair redefined the European aviation. The success of airline deregulation had a major influence on Irish economic policy IntroductionAlfred Kahn's visit to Ireland in October 2006 was a remarkable tour de force. He addressed the annual economic policy conference of economists, senior public servants and financial sector executives at Kenmare where celebrated his 89 th birthday. He lectured to packed halls of undergraduates in Trinity College, Dublin. He lived on campus, entered into the spirit of traditional events such as choral evensong and held briefings on competition issues for senior Irish regulators. Scores of undergraduate examination scripts in that academic year included phrases such like "as Alfred Kahn said on his visit last October".Kahn's visit was no empty ceremonial occasion. No country adopted more enthusiastically than Ireland the policy of airline deregulation developed by Alfred Kahn and promoted by President Carter and Senator Edward Kennedy. No country had more dramatic results from aviation deregulation than Ireland. In this special issue of the Review of Network Economics commemorating the economic and public policy contributions of Alfred Kahn, the export of his ideas to Ireland is an important case study. The sole Irish national airline had 2.2 million passengers in 1985/6, the last full year before deregulation in May 1986. In 2008, the four Irish airlines in the deregulated market have 72 million passengers. Airline deregulation was the first step in a series of changes in Irish economic policy, which led to the so-called Celtic Tiger era of rapid economic growth described in Table 7. The successive themes of this paper in sections 2, 3 and 4 below are the regulatory capture of aviation policy by Europe's national airlines, the stagnation before deregulation and the case made by Aer Lingus to exclude new market entrants from Irish aviation.* Department of Economics, Trinity College, Dublin,2, Ireland. E-mail: sbarrett@tcd.ie I appreciate the helpful comments of the editors and referees but the usual disclaimer applies. All errors are mine.

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Sources of Economic Rent in the Deregulated Airline Industry

Cited by 91 publications

References 0 publications

A theory of change in turbulent environments: the sequencing of dynamic capabilities following industry deregulation

A theory of change in turbulent environments: the sequencing of dynamic capabilities following industry deregulation

Reciprocal threats in multimarket rivalry: staking out ‘spheres of influence’ in the U.S. airline industry

Exporting Deregulation - Alfred Kahn and the Celtic Tiger

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