Underparticipation of countries in the airline industry

The airline sector is dominated by national and international regulations, the question of which airlines are to serve which routes being largely settled around a conference table. In this connection, the problem of developing countries is one both of lack of bargaining power and of inability (because of insufficient economies of scale) to compete effectively for the main international air routes. This inevitably leads to a degree of dependence by some tourism-intensive countries (for instance, the Caribbean islands) on foreign airlines for the transportation of tourists there. Should the routes involving these countries become less profitable than alternative routes, foreign airlines might cease to supply them, thus causing the host countries severe economic difficulties. Some airlines in the more advanced developing countries, particularly of Southeast Asia have managed to break into the market and grow to a size which allows them to compete effectively with developed country airlines; but in the case of other smaller countries, the economies of scale in international airline operations have been an obstacle in this respect.