Abstract
This article presents a structural model for intra-EU duopoly airline competition. Using a two-countries/two-airlines framework, three different competition scenarios are analysed. These scenarios reflect the new EU competition rules. The results suggest that the use of hub-and-spoke networks results in significant welfare gains. In addition, the model shows that cross-border mergers may increase net social welfare. Consequently, the paper suggests that the threat of monopolies through merger should not always be regarded with concern by EU authorities. (Author/publisher).