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Fall 2009

ISSN 0890-913X

Volume 25, Number 1

Categories: Economics | Fall 2009

U.S. Airline Antitrust Policy and Empty Core Disequilibrium

Thomas Tacker, Embry Riddle Aeronautical University

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TheJournalofPrivateEnterprise25(1),2009,69-79U.S.AirlineAntitrustPolicyandEmptyCoreDisequilibriumThomasTackerEmbryRiddleAeronauticalUniversityAbstractTheconceptofan“emptycore”isappliedtobetterunderstandtheUSairlineindustryandhowanti-trustpolicymightbestbealteredtohelptheindustryperformbetterforbothconsumersandinvestors.Horrendousfinanciallossesoverthelongtermsuggestanemptycoreandpointtolikelyincreasesinfutureindustryconcentration.Theseandotherrelatedproblemsmightbesolvedbyallowingcompetingairlinestomorefreelyformalliances.Theindustry’shistoryofincrediblyintensecompetitionsuggeststhatanyproblematictendencytoturnefficientcooperationintoinefficientcollusionmightwellbepreventedbynaturalrivalries.JELCodes:L93,L1,L2Keywords:Airlinecompetition;Emptycore;AntitrustI.IntroductionThedismalfinancialperformanceoftheU.S.“legacy”airlines,themajorhubandspokenetworkcarriers,isextraordinary.EvenbeforeallthebankruptciesfromtheproblemsofterroristattacksofSeptember11,2001,andsubsequentsurgingfuelcosts,returnsfortheairlineswereatthebottomofthecharts.Table1showslongrunratesofreturnforairlinestocksversustheS&P500andtheDowJonesIndustrials.(Thesefourwerethelegacycarriersthatavoidedbankruptcyintheperioddepicted.)So,forexample,investorswhoboughtallfourairlinestocksatthestartof1980andsubsequentlysoldthemonAugust31,2001,earnedareturnof333percent,aboutathirdofthereturnfortheS&P500ortheDow.Butthatwasacomparativelygoodperiodfortheairlines!1Byanydefinitionthisindustryhasnevercomecloseto1Inmanycases,ofcourse,thesesortsofratesofreturnareverysensitivetoparticularbuy/selldates.However,asthesefiguressuggest,thatwasnotatallthecasewiththeairlines.Basically,therewasnolongrunperiodinwhichanylegacyairlineperformedaswellasanycommonstockindex.Profitswerebetter,though69

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Title	U.S. Airline Antitrust Policy and Empty Core Disequilibrium
Authors/Creators:	Thomas Tacker, Embry Riddle Aeronautical University
Year:	2009
Volume:	25
Number:	1
Pages:	69 - 79
Publisher:	The Association of Private Enterprise Education
ISSN:	0890-913X
Document Type:	Articles
Keywords:	Competition, Antitrust Law, Empty core

Citation:
Tacker, Thomas / 2009. "U.S. Airline Antitrust Policy and Empty Core Disequilibrium." The Journal of Private Enterprise, 25(1): 69-79.