Since the hub and spoke system has taken place, the barrier to entry are higher because new carriers find it difficult to obtain gates and landing slots at the major hubs, and so the new entrants have been forced to use secondary airports. Even with this unprofitable situation, many entrepreneurs are still attracted by the apparent glamour of owning an airline. Furthermore, there are few major economies of scale in air transportation, so that both large and small airlines could coexist. However there are economies associated with network density, so that the greater the number of routes within a region the easier it is for an airline to gain economies and utilization of aircraft, crews, passengers and maintenance facilities.
The product differentiation is also a source of barriers to entry: in an industry were products are differentiated, established firms have got the advantage of brand recognition and customer loyalty, which was not so easy to be built up.
Another big problem was the retaliation: indeed retaliation against a new entrant may take the form of aggressive price cutting, sales promotion litigation or increased advertising. For example, the famous British Airways "dirty tricks- campaign against Virgin Atlantic, which included accessing Virgin's computer system and poaching its customers.
In addition, governmental and legal barriers are the mostly effective barriers to entry: indeed, there is new policy adopted by federal aviation administration, that put caps on the number of aircraft a new airline can operate based upon carrier's financial and managerial resources. This because according to a governmental accounting office study made many years ago, startup airlines' accident rate was higher than the major airlines' rate.
Competition from established rival: the airline industry can be characterized as an imperfect oligopoly, in which a few carriers dominate in long distance flights, while several dozen small carriers compete for short-distance flights.
