GOVERNMENT
For many years NZ air transport was closely regulated industry, both domestically and internationally. NZ government had a whole host of reasons why they ere not prepared to leave the industry entirely to the force of free and unfettered competition.
Governments traditionally regarded air transport as a public utility. Economists prefer to reserve the term 'public utility' to enterprises that have characteristics of natural monopoly.
There is general agreement on the need for regulation in natural monopoly industries. There are industries in which the ratio of fixed to variable cost is often very high. The fixed costs are often associated with heavy infrastructure investment, which often generates some enormous economies of scale, with average costs falling as output expands.
In New Zealand there are about 9000 pilots and 3350 aircraft. More than 4.5 million passengers travel on our main airlines' domestic services and 2.69 million arrive on international air carriers each year. Their safety is overseen by the CAA (civil aviation act).
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