At any given airport, the airlines hold long-term leases for passenger loading gates.New gates cannot be added without approval of the airlines.Frequent flier programs are also common in the industry.It is, therefore, more difficult for a new airline to enter a given airport (market).Such factors: (i) are called barriers to entry.
(ii) tend to decrease the contestability of the air travel market.
A)i and ii
B)i not ii
C)ii not i
D)neither i nor ii

Question

Quizplus · Accepted Answer

The first statement indicates that airlines have long-term leases for gates, which means that it would be difficult for a new airline to enter the market as they would have to secure a lease for a gate from the existing airlines. This is an example of a barrier to entry. The second statement indicates that frequent flier programs are common in the industry, which tends to decrease the contestability of the market as it creates loyalty among customers towards some airlines over others. Therefore, both statements are true and choice A is the correct answer.

At Any Given Airport, the Airlines Hold Long-Term Leases for Passenger