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Airline Industry

TAE HOON OUM ALLISON J. TAYLOR ANMING ZHANG

Strategic Airline Policy in the Globalizing Airline Networks
The airline industry in North America has changed dramatically over the last fifteen years, due primarily to the deregulation of the U.S. market in 1978. and the southern Canadian market in 1988. This deregulation allowed the airlines to set up efficient hub-and-spoke networks, and has led to organizational consolidation within the airline industry. The twenty trunk and local service carriers which existed in the U.S. in the mid-1970s have now been consolidated into seven major carriers. The liberalization of airline regulation in Canada, which began in 1984. encouraged a similar consolidation within the Canadian airline industry. Over the last five years, CP Air, Wardair, and four former regional carriers (PWA, Nordair, Quebecair, and EPA) have been integrated into Canadian Airlines International (CAl), creating essentially a duopoly market shared between CAI and Air Canada.' Consolidation has also begun in Europe, as exemplified by the merger between British Airways and British Caledonian in 1987 and the acquisition of UTA and Air Inter by Air France. Since the European Community entered the virtually "open border" arrangement among its member states in January 1993, there will surely be an even greater consolidation of its airline industry, as the major carriers
Mr. Oum is W.J. VanDusen professor of management. The University of British Columbia, Vancouver, B.C., V6T IZ2, Canada; Ms. Taylor is associate professor in the School of Business, Queen's University, Kingston, Ontario, K7L 3N6, Canada; and Mr. Zhang is assistant professor in the Department of Economics, University of Victoria, Victoria, B.C., V8W2Y2, Canada, The authors acknowledge gratefully the grant support of the Social Science and Humanities Research Council (SSHRC) and the Natural Science and Engineering Research Council (NSERC) of Canada. For the application to the Canadian situation, the...