After the airline industry was deregulated, a series of mergers created a four-carrier oligopoly with an 85 percent market share. Reduced competition brought worse service and higher fares. With Washington’s refusal to rein in the unfettered airline industry, flying is going to get more uncomfortable.

a. Explain how airline mergers might (i) increase fares or (ii) lower airline production costs.

b. Explain how lower costs might be passed on to travelers or boost airlines’ profits. What does the news clip say happened and how would you explain that outcome?