Answer the question, \"What market structure is the airline industry?\" Support your answer with data. Solution The United States airline industry today is arguably an oligopoly. An oligopoly exists when a market is controlled by a small group of firms, often because the barrier to entry is significant enough to discourage potential competitors. As of 2017, there are four major domestic airlines – American Airlines, Inc. (AAL), Delta Air Lines, Inc. (DAL) Southwest and United Airlines, subsidiary of United Continental Holdings, Inc. (UAL) – which fly about 80% of all domestic passengers. In 2015, North American airlines were projected by the International Air Transport Association (IATA) to earn $15.7 billion in net profits and achieve net profit margins of 7.5%, which is twice the worldwide average. Delta has the largest market share with 16.7%. Southwest is close behind with 16.6%, while United and American have 15.3% and 12.5% respectively. The U.S. hasn’t had a new scheduled passenger airline since 2007.

1. Answer the question, "What market structure is the airline industry?" Support your answer with
data.
Solution
The United States airline industry today is arguably an oligopoly. An oligopoly exists when a
market is controlled by a small group of firms, often because the barrier to entry is significant
enough to discourage potential competitors. As of 2017, there are four major domestic airlines –
American Airlines, Inc. (AAL), Delta Air Lines, Inc. (DAL) Southwest and United Airlines,
subsidiary of United Continental Holdings, Inc. (UAL) – which fly about 80% of all domestic
passengers.
In 2015, North American airlines were projected by the International Air Transport Association
(IATA) to earn $15.7 billion in net profits and achieve net profit margins of 7.5%, which is twice
the worldwide average. Delta has the largest market share with 16.7%. Southwest is close behind
with 16.6%, while United and American have 15.3% and 12.5% respectively. The U.S. hasn’t
had a new scheduled passenger airline since 2007