IS THE AIRLINE INDUSTRY A NATURAL MONOPOLY 193 FSCs operating large hub-and-spokes networks within global alliances create barriers to entry, even though there could be inter-network competition for O&D49 indirect flights. High yield business passengers are particularly sensitive to the brand, Frequent Flyer Programs and to using a network that would allow them to travel through a vast number of destinations50. The economies of density created with the network would create positive externalities (supply and demand), but would also create barriers to entry for point-to-point carriers or regional carriers that do not operate the same business model. This would tend to increase the mutual restraint assumption as each carrier will specialise in different markets and network models. The shortage of slots at congested airports is a clear barrier to entry. In IAG/ BMI (2012), the EU Commission concluded that “IAG would be likely to be less threatened by new entries” because of “lower incentives and higher barriers to entry”51. Due to the heavy congestion prevailing at Heathrow, “entry opportunities would remain strongly limited by the scarcity of slots”52, and offering frequencies enable airlines to compete on the most profitable segments of business travellers or time-sensitive passengers. The theory of mutual forbearance is relevant when barriers to entry are identified. Competition could be hampered on routes from congested airports. The potential competitors would rather build a base or a hub on another airport and try to find profitable markets away from fierce competition. 4.3. Economic Efficiencies versus Consumer Welfare According to Article 102 TFEU, excessive pricing can be a violation of EU competition law as abuse may consist in “directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions”. The prospective control of concentrations is based on the assumption that increased market power would presume similar anti-competitive effects, especially over the consumers: “the Commission prevents mergers that would be likely to deprive customers of these benefits by significantly increasing the market power of firms. By ‘increased market power’ is meant the ability of one or more firms to profitably 49 Relevant markets in the air transport are defined as pairs of origin and destination. 50 See, for instance, Air France/KLM (2004), para 74. 51 IAG/BMI (2012), paras 154 and 155. 52 IAG/BMI (2012), para 148.
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