Abstract
This article discusses the results of a continuous study of Russian domestic air carriers conducted in 2006-2016 and analyzes the main barriers to entry into the passenger air travel market and their impact on competition in this field. There are significant structural barriers that prevent companies from entering this market. This situation challenges the existing concept and the idea of the domestic air transportation market as a quasi-competitive one. To describe the structure of the Russian passenger air transport market, we introduce the notion of “discrete competition,” reflecting shifted density of market concentration towards small regional airlines. The latter are usually united by ownership mechanisms or affiliation with an airport. They possess considerable market power, but at the same time have an insignificant market share in the overall Russian passenger air market. Administrative barriers also play a crucial role in restraining competition. Furthermore, current institutional conditions are favourable for vertical airport - airline integration which results in a fundamental transformation, as described by Williamson, and can be detrimental to competition. As our research findings have shown, there is a trade-off between existing vertically integrated structures in the air passenger market and public welfare.
Highlights
Passenger air travel sector serves as one of the key indicators of the whole economic infrastructure development as the demand for air carriage reflects the population’s welfare
Among the most important economic issues related to the air passenger market is the problem of competition and the scale of state regulation that is appropriate for this sphere
The official data were supplemented with the results of our own research which included questionnaire-based surveys and interviews with over one hundred and fifty experts from various Russian domestic airlines
Summary
Passenger air travel sector serves as one of the key indicators of the whole economic infrastructure development as the demand for air carriage reflects the population’s welfare. A visible correlation between aviation development and air travel market in a country signifies economic, industrial, social, and institutional efficiency of the state policy. All these aspects make it especially interesting to analyse the air passenger market. Issues of quasi-competition were investigated in relation to large, capacious civil aviation markets, such as the US air transportation market [Seliverstov, 2016]. Unlike developed markets, those of emerging economies, such as Russia and the CIS countries, are characterized not by quasi-competition but rather by discrete competition [Lukyanov, Kislyak, 2007; Lukyanov, 2008; Lukyanov, Evtyukhov, 2010]. We revealed the most efficient strategies of entry into the APM to promote competition in this sector
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