Pros and Cons of Airline Deregulation

The deregulation of the commercial airline industry in the US was initiated by the Carter Administration in 1978 (Thayer, 1983). The momentum was building for deregulation of the airline industry in the face of resistance by most of the minor and some of the major American airline companies (Meyer & Oster, 1981). The primary reason for the unenthusiastic response to deregulation, on the part of the smaller airlines, was a fear that the larger airlines would (1) enter the profitable medium-haul markets which regulation of the industry had denied to them, (2) underprice the smaller airlines operating in these markets, (3) drive the smaller airlines out of the industry, and (4) eventually raise prices in the medium-haul markets. The expressed fear of some of the larger airlines was that deregulation would ultimately result in (1) an oligopolistic airline industry in the United States, which (2) would be far less competitive than that which existed in the mid-1970s. The real fears were the loss of protected markets, and governmentally established fare structures. Airline industry executives opposing deregulation lauded the Civil Aeronautics Board (CAB) for creating a cohesive and an effective national air transportation system,

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his was a true objective for both the Carter Administration and the Reagan Administration. It was not however, the only objective. The Carter Administration was more conservative than the Reagan Administration in its approach to federal budget deficits. It wanted an end to federal exposure to support industry, and it wanted to lower prices to consumers through increased competition. The deregulation of the airline industry was just one facet of a larger deregulation effort, which included long-distance truck hauling, banking, telecommunications, and airlines. In the area of deregulation, the Reagan Administration merely continued what the Carter Administration has started. The American model for deregulation had three facets. First, it was consumer-oriented. There was a genuine desire to lower consumer costs, and increase consumer choices through deregulation. Second, in an era of fiscal constraints, government wanted to reduce its exposure to the support of industrial activity. The Carter Administration had reduced its deficit to $27 billion in 1979, and it wanted to reduce the deficits even further. Third, government wanted to reduce its role in industry management. THE EFFECTS OF DEREGULATION Prior to deregulati
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Approximate Word count = 1613
Approximate Pages = 6 (250 words per page)