This study aims to investigate whether the Indian airline industry operates in a competitive market environment or exhibits collusive behavior.
The study explores the impact of key market structure variables – coefficient of variation (CV), four-firm concentration ratio, Hirschman–Herfindahl index and dominant firms’ market share, alongside operational factors – passenger load factor (PLF) and fuel costs on industry profitability.
The analysis yields two key insights: first, CV proves to be the most significant concentration measure, effectively reflecting the market’s structural dynamics; second, PLF plays a critical role in driving airline competitiveness and long-term sustainability.
The study underscores the importance of operational efficiency, aligns with the revisionist perspective on market dynamics and offers actionable insights for airlines striving to succeed in a concentrated yet competitive industry.
Grounded in the collusion and efficiency hypotheses, this study establishes a theoretical basis to interpret market outcomes. Davidson and MacKinnon’s J-test is employed to assess the validity of hypotheses.
