In the modern era, air travel is the lifeblood of any nation. It fuels not only domestic connectivity but also international trade, tourism, and economic growth. However, as countries become more reliant on air travel, a significant risk emerges when a few dominant players, or a “duopoly,” come to control the majority of an aviation market. This concentration of power is rapidly becoming a serious concern for the future of aviation and the broader economy. Let’s explore the dangers that this duopoly presents to an aviation nation.
1. Limited Competition and Higher Prices
When two companies dominate an entire sector, consumers are often left with few alternatives. This lack of competition frequently results in inflated prices, price fixing, and reduced service quality. Without the drive to attract customers through competitive pricing or better services, these dominant players may raise prices with little to no repercussions. Furthermore, the absence of competition stifles innovation, leading to stagnant offerings and a lack of new, improved products.
Picture credits: CNBC TV18 : For Representation Purpose
2. Market Manipulation and Unfair Practices
The coordination between two industry giants can result in market manipulation. While explicit price-fixing may be illegal, a duopoly often leads to informal price coordination, where both companies align their pricing strategies to maximize profit. This not only limits consumer choice but also opens the door to unfair business practices. The monopoly-like control over the market creates a power imbalance, leaving consumers and smaller businesses powerless.
3. Vulnerability in Case of Disruption
One of the most significant dangers of a duopoly is the vulnerability it creates within the entire aviation system. If either of the two dominant players faces financial troubles, operational failures, or a crisis (such as a technological breakdown or mismanagement), the repercussions could ripple throughout the entire market. This could severely disrupt domestic and international connectivity, leaving an entire nation in jeopardy.
4. Lack of Innovation and Stagnant Offerings
Competition is a key driver of innovation. However, in a duopoly, the lack of viable competitors weakens this drive. Dominant companies may become complacent, as they no longer feel the need to improve products, enhance services, or adopt cutting-edge technology. As a result, consumers may be stuck with outdated options or may see little to no improvement in the services they rely on.
5. Fewer Options for Consumers
With only two major players in the market, consumers have limited choices. This becomes especially problematic when it comes to flight schedules, routes, and overall service quality. Limited alternatives restrict consumer freedom, leading to frustration and dissatisfaction. Additionally, the lack of variety in available services means that customers may settle for subpar options.
6. Barriers to Entry for New Businesses
A duopoly makes it exceedingly difficult for smaller companies or startups to enter the market. The dominant companies possess significant resources and market control, which creates substantial barriers for new businesses to establish themselves. Over the last two decades, we have seen the closure of dozens of airlines due to the overwhelming dominance of such a duopolistic approach.
7. Artificial Shortages and Price Control
The two major players may also manipulate the supply of flights to further control the market. By restricting the number of available seats or creating artificial shortages, they can drive up prices while providing little added value to customers. Such practices artificially inflate costs and reduce service availability, creating a distorted market.
8. Complacency and Declining Service Quality
When there is no external threat to their market position, the dominant companies may become complacent. Over time, this can lead to a decline in service quality as companies feel little pressure to maintain high standards. Without the need to continuously improve or offer competitive alternatives, the consumer experience suffers.
9. Systemic Risk and Overreliance on Few Players
A reliance on only two major companies poses a systemic risk to the nation’s aviation infrastructure. If one of the dominant players fails or faces a crisis, the entire system could collapse. The economy and consumers would be left vulnerable, especially in times of global crises or unforeseen challenges, where flexibility and diversity in market players are essential for resilience.
10. Increased Lobbying Power and Regulatory Influence
A duopoly also grants the dominant players considerable power to influence government policy and regulations. These companies may use their lobbying power to secure favorable rules and regulations, which further entrench their market position and limit competition. This imbalance in power allows them to shape the system to their advantage, often at the expense of consumers and smaller businesses.
11. Wealth Concentration and Economic Inequality
The financial benefits of a duopoly are concentrated in the hands of a few, leading to economic inequality. The profits amassed by the dominant companies may have regional or demographic impacts, with certain areas benefiting more than others. The wealth generated in this concentrated system is not spread evenly, exacerbating inequality within the broader economy.
Recent Incident of Service Lapse
Union Agriculture Minister and former Madhya Pradesh Chief Minister Shivraj Singh Chouhan experienced poor service on Air India flight AI 436 from Bhopal to Delhi when he was assigned a broken and sunken seat on Saturday. Despite staff acknowledging that the seat was previously reported as unfit, it was still sold to passengers.
Chouhan criticized the airline on social media, calling the practice “unethical”. This incident highlights how a lack of competition can lead to service neglect, directly affecting passenger experience.
Conclusion
In conclusion, a duopoly in the aviation sector can have far-reaching consequences for both the economy and consumers. It can lead to reduced efficiency, higher costs, a lack of innovation, and limited consumer choice. The market becomes increasingly vulnerable to disruption, and the nation becomes over-reliant on only two players. Ultimately, this concentration of power can undermine societal progress and result in suboptimal outcomes for both the public and potential market entrants. For the long-term sustainability of a nation’s aviation industry, it is crucial to maintain a competitive and diverse market that fosters growth, innovation, and consumer welfare.
Disclaimer: The opinions presented in this article are solely those of the author and do not represent the views of Aviation Today.
