Competition in the Turkish airline industry

The air transportation sector, which is an important part of the transportation network, has become a continuously growing and renewing sector under the influence of developing technology. This sector plays an important role in the formation of the global economy by connecting many countries in the world. The sector has come to the forefront with its direct contribution to the world economy as well as indirect contributions and has become a key factor for other sectors such as tourism. With the liberalization of air transport around the world, airline passenger transport has gained a global mission and allowed the industry to compete with the increasing number of firms following liberalization. The effects of the liberalization process in the global level, Turkey has started this process in conjunction with the law issued in 1983. In the ongoing process, the removal of price restrictions and the regulations facilitated the entry of new firms into the sector. On the other hand, the reduction of THY's public share in 2003 provided competition in the markets to be carried out fairly. In addition, according to free market conditions, firms are able to determine their own prices. All these developments have intensified competition in the Turkish Air Transport sector as well as in the world. In this study, the air transport sector in Turkey is aimed to measure the competition. In this context, it is emphasized the development process of airway transportation in the world and its case in Turkey has been analyzed in detail. Also, in airway transport demand, measurement of demand elasticity and factors affecting demand; price, income, replacement product and sector specific demand determinants; demographic and geographical factors are also discussed in detail. Corporate behavior and sector's performance such as structure of the sector, pricing and production strategies are explained by the structure conduct performance (SCP) approach. Competition analysis was made with an empirical study and in this direction, the Herfindahl-Hirschman index was used to measure the distribution of the shares of each company. In the data set, city pairs were accepted as market in terms of literature compatibility and this market density was calculated by HHI index. Empirical analysis has proven that the structures of the city pairs markets are a natural oligopoly and that in each airline market one or two firms are superior. It has been seen that the density of the market participants affects the airline's decision to enter the market.