Competition versus Predation in Aviation Markets

Chapter 9The Lufthansa-Germania Case at a Glance

Kai Hüschelrath

1. Introduction

Cases of alleged predatory pricing in the airline industry are not rare and often follow a similar structure: A new and usually small airline enters a route thus threatening the incumbent operating in that city-pair. Consequently – and according to standard oligopoly theories – it is rational for the incumbent to adjust the pre-entry (monopoly) price downwards 'significantly'.¹ The question one needs to ask here is if the kind and extent of the incumbent's adjustment(s) can be explained by 'competitive behaviour in the presence of market entry' or if it is motivated by 'anti-competitive' purposes aiming at maintaining market power.

Much less common than cases of ...