Friday, February 19th, 2010

BA-AA and what the animal kingdom can show

The blogosphere and other worthies have gone all hot and heavy about the announcement of the approval by the US DoT of the AA-BA alliances’ application for anti-trust immunity.

There are a lot of things that could be said about this decision – and most are being said.  But much overlooked is that there is – finally – attention being paid to the entire issue of network dynamics.  Since Pontius was a pilot anti-trust applications, indeed general regulatory review, has focused on city pairs.  Sure, important in so far as they go – from one city to another, mainly, they entirely miss the point about networks.

Airlines, at least full service ones, are network businesses.  There is a small, but slowly growing study in economics of network economics.  When I was at IATA I tried to commission a major study on this point.  At Qantas we based an entire ATI application (the first one, notwithstanding what folk in Nth America may say) on it, but it remains less well known than it should.

Fortunately, science has ridden in to the rescue.  There is a growing body of study that shows that such things as amoeba work out their survival based on network theories of efficency.  Hubs are important.  See this article from the Economist for example: http://www.economist.com/sciencetechnology/displaystory.cfm?story_id=15328524

There is an analogy to be drawn about forms of life and airline executives, but I don’t do obvious, obviously.

The second very important point is that the DoT makes specific reference to the fact that they had worked on this with the European Commission.  We are getting regulatory convergence.  This has huge implications, particularly if you are a non-alligned carrier.  And what it means is clear – speak now, or forever hold your peace…

Posted by admin on February 19th, 2010 | Filed in Uncategorized | Comment now »

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