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172 pages, Kindle Edition
Published November 14, 2023
By the 2010s, airlines were increasingly subject to horizontal shareholding. That is, shareholders owned stock in multiple, rival airlines. Seven shareholders together had 60 percent ownership of United Airlines between 2013 and 2015. But they also owned 27.5 percent of Delta, 27.3 percent of JetBlue, and 23.3 percent of Southwest. Economic research has shown that horizontal shareholding means higher prices—some 3 to 10 percent in the case of airlines. As Harvard Law School professor Einer Elhauge explains, “[T]he reason is that firms maximize profits by competing only when the profits from taking market share away from other firms exceed the interest in keeping marketwide prices high.” For the airlines, it’s better to keep market prices high, rather than competing with each other. Importantly, keeping industry profits high does not require communication or explicit collusion. Airline CEOs no longer feel the need, as Crandall did, to propose jointly raising prices. It is in their shareholders’ interest—and therefore theirs—to keep prices high. To the extent the airline industry was already an oligopoly, it is now further concentrated through these “common owners.”