Topic Author
Posts: 447
Joined: Mon Feb 12, 2001 5:52 am

AC A Natural Monopoly?

Mon Apr 09, 2001 2:39 am

Before anyone comments on this, let me preface it with a couple of thoughts. Firstly, I've been annoyed with AC's "transition" in the merger with Canadian as much as everyone else. Secondly, my post is simply for the sake of argument, and doesn't necessarily respresent my thoughts on the issue.

Industrial Organization theory covers the economics regarding how industries and firms allign themselves within various markets. One section of this is a natural monopoly. A natural monopoly occurs when it is the most economically efficient in terms of costs and competition that only one firm operate within a market. This is due to decreasing average costs, and increasing economies of scale. With respect to airlines, regulators and competition law look at specific city pairs with analysing anti-competitive behaviour. Many Canadian city pairs are low demand, and perhaps Air Canada is the only firm that should be on those routes. Because of the high cost of obscure routes, they may be the only ones able to cross-subsidize it, as all of the other low cost carriers work on such low margins - what allows them to effectively compete. Is it possible then that C3 in it's big buying scheme, and Roots Air (as awesome as I think it is) maybe trying to compete in a market just may not foster competition?
Posts: 871
Joined: Sat Aug 21, 1999 4:15 am

RE: AC A Natural Monopoly?

Mon Apr 09, 2001 2:55 am

Hey there,
I think thta you have some good points there but I think that Canada3000 and now Roots air will give Air Canada some really good competition. Hopefully Roots will start to fly into St john's YYT really soon. Air Canada has the only first class flights going int St john's and if Roots went in there with Direct Flights from YYZ would be a real blow to Air Canada. We have a new and becoming booming oil industry there and most of the air Canada flights for first Class passengers are quite full, actually the Ac flights into st John's are normally very full, every flight I have flown with them has been. But If roots would just go and listen to YYT people they would think again about adding YHZ. god I hope someone from Roots in the right department will read this!! ADD YYT for one of the next destinations!! Well just figured that I would add my two cents worth!!

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