IS THE AIRLINE INDUSTRY A NATURAL MONOPOLY 183 on the ground, thus absorbing temporary delays. Hub-and-spokes networks also achieve economies of density by using larger aircrafts mainly from hubs, hence reducing the number of point-to-point flights over smaller seats. However, the absence of a point-to-point route will generate a negative external effect as regards the disruption of customer travel24. The economies of scale, density and scope are not of the same importance in the airline industry. In general, returns to scale are constant, whereas increasing returns to density prevail. The fact that returns to scale are constant in the airline industry minimises the relative significance of size in air transport. Economies of scales do not explain the cost advantage of bigger airlines over smaller regional airlines, with some studies highlighting that the main factor in explaining higher costs for smaller or regional airlines is the density of traffic within its network and the average length of individual flights25. The existence of increasing density yields, combined with the fact that the unit costs decrease with the travelled distance, gives a clear theoretical advantage to carriers operating on routes with the bigger traffic over longer distances26. Nonetheless, shorter distances combined with higher frequencies and short turn-around at airports can stimulate demand and compensate the relative cost disadvantage of operating shorter routes. Highdensity operations from large airport bases explain the success of European LCCs such as Ryanair and EasyJet, as they were both able to capture increasing demand through higher frequencies. The network carriers benefit from economies of scale, density and scope when they operate a hub, whereas point- -to-point carriers do operate for an airport base. 3. THE ANTI-COMPETITIVE EFFECTS OF CONCENTRATION HIGHLIGHTED BY AIRLINES ECONOMICS Competition issues resulting from airline dominance were identified by airline economics, and the contestable markets theory did not adequately respond as expected to empirical evidence. The trend of the airline industry toward mutual restraint, monopoly or oligopolies was found to be relevant, as it could be 24 Morrison & Winston, 1995, “The Evolution of the Airline Industry”, Brookings Institute. 25 Caves, Christensen & Tretheway, 1984, “Economies of Density versus Economies of Scale: Why Trunk and Local Service Airline Costs Differ”, RAND Journal of Economics, Vol.15, pp.471-489. 26 Encaoua & Perrot, 1992, Concurrence et coopération dans le transport aérien en Europe, Publication de la Commission européenne, Office des publications des Communautés européennes, Luxembourg.
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