Contestable

Contestable 39&8242 Shreenaeconomics Is the airline foodstuff shakable? definition Of contestability when there are none or depleted barriers to en take heed for incumbent firms Where they Will be forced to keep prices competitive and profits low in the long term. Otherwise this Will encourage Other firms to infix into the market.There are roughly 20 airline companies based in the 0K market It iS a form Of an oligopolistic market and price is not always the causal factor of demand but non price factors such as Inflight run and atmosphere. Is shakeable Not contestable Low make up airlines as there are lower barriers to entry and make it as you give the axe lease airplanes and undertake the set up cost. There are also no change posture costs If leased airplanes.This means that capital wont be mixed-up when exiting the market High barriers to entry In terms of sunk costs and Infrastructural costs. Providing services costs a lot ot money (le first associate cabins) There Is competition between companies so cutting tirms can raise and make normal profits There are dominant tirms in the market, there will be brand loyalty which reduces contestability as new firms will have to manage on onprlce factors to gain loyal customers and to compete with other firms. an example being british airways and virgin BA has a calm quiet in air craft experience and staring(a) airlines offer a lively talk promoting atmosphere where even the airhostesses try and lose conversations going) Access to the same level of technology. this means that the costs severally firm take on from technological aspects such as inflight services and ways of booking are the same so it doesnt stop competition as there is no LISPS.The bigger firms can exploit economies of scale as they produce at lower average unit cost compared to new firms entering the market which do not have blameless information about cheap suppliers or bulk buy to get big discounts, the low cost airline market is more contestable than normal airlines use of the Internet to reduce distribution Costs exploit the utilisation Of the aircraft assets Direct sell only Via the net Ticketless travel NO free airline food one kind of aircraft commonality maxmlses talent in the recruitment and training of staff Predatory pricing can occur In the short which can drive away new firms, they reduce heir profits below average costs and look at with saved revenues till the new firms cannot make any profit and they exit the market.