Concentration in Türkiye's domestic airline transportation market and its impact on social benefit

According to the structure-conduct-performance paradigm, market structure plays a decisive role in determining the performance of the market by influencing business behaviour. An increase in concentration of a sector or market leads to a lack of competitive behaviour of businesses and a decrease in the performance of the sector's benefits to society. In the history of airline transportation, the validity of this paradigm has been observed with the rapid increase in the benefits to society as a result of competitive structure and decreasing concentration after the deregulation. In Türkiye, as in the rest of the world, access to airline transportation became easier after the deregulation of domestic routes, and the number of flights and passengers carried in the market increased rapidly in the following years. However, at some point, market entry stopped, airline companies started to go bankrupt and exit the market, and market concentration started to increase again. The research has been conducted with the aim of increasing the benefits of domestic airline transportation in Türkiye to the society. Accordingly, the market shares of airline companies for the period between 2000 and 2023, i.e. from the years of deregulation until present, were obtained from the annual number of passengers carried by airlines on domestic routes. Concentration was measured with n-Firm Concentration Ratio and Herfindahl-Hirschmann indices from the market shares. The changes in the market shares of airline companies and the concentration index values of the market in this process were interpreted. In the next stage, the annual rate of change in the concentration index, passengers carried and flights offered to the market were analysed using the Least Squares method for Time Series Analysis. The analysis reveals that the rate of change in concentration has an inverse effect on the rate of change in the number of passengers and flights. Policy recommendations have been made to reduce the increasing concentration. Keywords: Airline transportation, Airline economics, Market concentration, Competition, Time series analysis