It is difficult for a new airline to enter and compete with incumbent airline companies because:

A. Incumbents have superior digital technologies.
B. Incumbents typically have a technological edge compared to new entrants.
C. Incumbents have higher market shares with greater economies of scale.
D. Incumbents have greater fixed costs but lower variable costs relative to new entrants.

New airlines face significant Business competition when entering the market due to incumbent airlines' technological superiority, larger market shares, and greater economies of scale. The advent of new technologies can potentially allow smaller firms to compete or create a 'winner-take-all' market. Predatory pricing practices by incumbent airlines also deter new entries.

Explanation:

The difficulty for a new airline to enter the market and compete with incumbent airlines can be attributed to a range of factors. First, incumbent airlines often have advanced digital technologies and more-established operational processes, giving them a technological edge over new entrants.

Additionally, incumbents typically command higher market shares and can achieve greater economies of scale, further pressuring new entrants.

In recent years, the impact of new information and communication technologies on the size of firms has been a topic of debate. Some believe these technologies can expand the reach of small firms, potentially enabling more competition.

Conversely, some argue that these advancements can create 'winner-take-all' markets, such as those seen in the software and online retail industry, in which one company (like Microsoft or Amazon) gains a significantly larger market share.

Numerous examples from the early 2000s show smaller airlines accusing larger airlines of predatory pricing, a strategy where prices are reduced to a level low enough to knock competitors out of the market, after which the pricing power is regained.

This discourages new entrants from attempting to compete. Such instances further compound the challenges new players face when trying to penetrate the airline industry.

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