## 4 Case Study Results
### The Application of [PERSON]'s Five Forces Model to the AeroLogic Joint Venture
#### 4.5.2 Barriers to Market Entry in the Global Air Cargo Industry  
The presence of market entry barriers restricts the number of firms competing in the global air cargo industry and, thus, influences the rivalry amongst the incumbent actors. There are four distinct types of legal entry barriers in the airline industry: airline ownership, airline operating licenses, route-specific air services rights, and perimeter rules at airports [183]. Furthermore, if new airlines enter the air cargo market, the competitive advantages of the incumbent carriers are immediately influenced. This is because the new entrant provides new additional air cargo carrying capacities in the existing market. This additional air cargo capacity typically diminishes the profit margins of all market participants [175]. When the market entry barriers are low, there is a greater threat to the incumbent airlines [184]. There are three other distinct entry barriers in the air cargo industry that are applicable for pure new dedicated cargo airlines, and not, however, for the additional air cargo capacity provided by the combination airlines.  
* Existing incumbent all cargo airlines realize economies of scale by over proportionally decreasing the total cost whilst, at the same time, increasing their production capacity, that is, freight tonne kilometres (FTKs) performed;
* The incumbent carriers may have already attained high brand recognition, intense customer loyalty, or similar marketing targets. For the new entrant to compete in the market, then they must incur the costs for sales support, advertising, and other marketing initiatives; and
* Entry into the air cargo market requires substantial investment and capital. In terms of capital expenditure and costs incurred, the risk of a new cargo airline failing (sunk costs) presents a major hurdle for new market entrants [175] (p. 319).  
In the global air transport industry, airport'slots' are a classic barrier to market entry. In cases where airport slots continue to be awarded under the 'Grandfather Rights' principle, it would then be very difficult for new entrants to obtain access to attractively-timed slots at congested airports. However, the legalization of the so-called 'Secondary Slot Trading' does provide new entrants with the possibility of purchasing slots. If they do purchase them, however, they will still need to compete against incumbent airlines who obtained many, or all, of their slots for free [120] (p. 88). At the time of the current study, AeroLogic appeared to have not been affected by this issue.  
Governmental policy is a major entry barrier [173]. In today's air cargo (and airline) industry there are stringent security regulations that can pose a barrier to market entry due to the associated costs [184]. Aerologic, like the combination airlines, the dedicated all-cargo airlines, and the integrated carriers, must comply with all government regulations.  
AeroLogic is quite unique in the air cargo industry in that the airline is owned by two German-based firms (thus, there were no ownership issues), it has its own air operator certificate (AOC), and its primary hub is Leipzig/Halle Airport, which operates 24 h per day. Additionally, as has been noted previously, it only carries cargo on behalf of its two JV partners over a customized route network. Thus, the threat of a new entrant may be quite low for AeroLogic, but could be higher for Lufthansa Cargo, who provides air cargo services primarily using the belly-hold capacity of Lufthansa and Austrian Airlines passenger aircraft, as well as a fleet of Boeing B777-200 LRF and Boeing MD11 freighter aircraft.