Compare And Contrast Delta Airlines Oligopoly

The airline industry is one of the most important industries in modern society as it keeps the world connected. Two of the biggest firms in this market are Southwest Airlines and Delta Airlines. The industry is an example of an oligopoly as only a small number of firms sell their services in a market with high barriers to entry. These high barriers largely come from the capital required to purchase a jet, let alone hundreds of jets, and to operate them with pilots and a crew. In this market, both Southwest Airlines and Delta Airlines share significant market power, and the decisions one company makes impacts the other, they are highly interdependent. Southwest Airlines is known for being a cheaper option, and they provide flexible travel plans as their tickets are refundable. Since 2010, the firm has established itself a major player in the market because of their acquisition of AirTran, and as a result, the industry has completely transformed

Traditional economics cannot model this because many of these decisions are not financially optimal, so behavioral economics must be used. A downside of only operating the Boeing 737 aircraft is that smaller airports cannot be reached. Additionally, Southwest faces a tough market in which Delta has long standing contracts with major cities. In fact, Southwest was given landing rights at Atlanta Hartsfield-Jackson Airport, the world’s busiest airport, in only 2010 (Economist). Because Southwest can only reach metropolitan airports, many consumers who live outside of the city will choose to fly Delta in order to fly into a regional airport; those that live in the city may fly Delta simply because they offer more flights to their destination. This may cost much more, but they will possibly save hours of waiting in traffic or delays, emphasizing the importance of positive time