3. Airline Dominance

Another problem not encountered with the British experience is the dominance of one airline at a given airport. While British Airways has the largest market share in Great Britain, the airline does not have a majority of the market. Similarly, British Airways has not historically had as much leverage at British airports as U.S. airlines at U.S. airports in determining which gates it is assigned and other matters of airport management. Because the use of hubs is not as common abroad as in the U.S., airlines have not needed the careful gate assignments U.S. carriers enjoy at the airports they dominate. [39]

In an unrestricted environment, privatization of Metro could result in more serious problems if the dominant airline is given too much leverage in its relationship with the airport. Under such a scenario, it might be conceivable for Northwest (with 57% of Metro's market) to gain a competitive advantage by:

a) Acquiring an equity position in the airport giving it a role in airport decision-making as an owner,

b) Entering into special agreements with the airport to enhance its dominance, or

c) Using its market share to leverage special conditions.

A provision of privatization of BAA prohibited any entity from acquiring more than 15% of the outstanding shares of BAA. Thus, British Airways (or any other airline) could not acquire more than 15% ownership in BAA. (fn fact, British Airways owns none of BAAs outstanding shares.) [40]

BAA has been very careful to avoid any special treatment of British Airways. Representatives of BAA and British Airways independently observed that market demand for landing rights and space at the busiest airports in Great Britain make any special arrangements highly unlikely. Demand is so great that were British Airways to reduce utilization anywhere, other airlines would happily take up the available capacity.

A similar situation exists at Metro. Detroit is such a popular location for an airline hub that were Northwest to relocate elsewhere, another airline would certainly enjoy the benefits of the Detroit area's location and air travel demand.

In the current negotiations for the expansion of Metro, Northwest – the dominant airline – has a strong interest in expansion to increase its hub operations. Other airlines using Metro have no such interest. In fact, it is in the interest of other airlines to stifle the growth of Metro to keep Northwest from expanding capacity. Theoretically, non-dominant airlines could disrupt competition by vetoing any expansion not in their own best interest.

In a privatized system, contractual controls which are not in the best interest of the community might be avoided. The airport could expand without receiving approval of 85% of the airlines (as the Basic Agreement requires).