The U.S. Airline Industry

The U.S. airline industry was deregulated de facto by the policies of the Civil Aeronautics Board from 1976 to 1978, and, subsequently, de jure by Congress with the Airline Deregulation Act of 1978, based on the rationale that market forces would provide the impetus for increased and sustained competition between carriers, which would further translate into vastly improved quality and quantity of service for the consumer, and at significantly lower cost--a process known as contestability theory. According to Borenstein, for many economists, however, deregulation was simply the rejection of some 50 years of "incredibly inefficient regulation" (53).

The Carter administration actively promoted the deregulation of the airline industry as it had the trucking industry and financial institutions. The Reagan administration's approach to various forms of deregulation was embodied more in the relaxation of safety and environmental controls (which were viewed as being responsible for driving up the cost of doing business), rather than industry-wide deregulatory acts. The Bush administration carried that approach to its apex in the guise of the "Council on Competitiveness" (Kelly 6). And now the Clinton administration has both eliminated the Council on Competitiveness and created the "National Commission to Ensure a Strong Competitive Airline Industry" (Sheehan 84).

The popular media have been quick to focus on the "shakeout" of the airline industry, which has seen as many as 31 na

Related Essays

Regulation of US Airline Industry .... Biederman, P. (1982). The US airline industry end of an era. New York: Praeger Publishers. The Economist. (1983, 22 October). What freedom of the skies? .... (3871 15 )

Effect of Deregulation on US Airline Industry .... Cambridge, Massachusetts: The MIT Press. Biederman, P. (1982). The US airline industry end of an era. New York: Praeger Publishers. The Economist. .... (2516 10 )

EFFECTS OF 9/11 ON THE US AIRLINE INDUSTRY EFFECTS OF 9/11 ON THE US AIRLINE INDUSTRY The terrorist strike on the New York World Trade Center and the Pentagon on September 11, 2001, when civilian .... (2017 8 )

Deregulation of Air Transportation Industry in the US .... November 1989, 70 71. Biederman, P. The US Airline Industry End of An Era. New York: Praeger Publishers, 1982. Farris, MT "Contested .... (1621 6 )

Effects of Airline Deregulation in the US INTRODUCTION This .... Thus, there is no single result on consumers of airline deregulation. Biederman, P. The US Airline Industry End of An Era. New York: Praeger Publishers, 1982. .... (1561 6 )

The economic theories which paved the way for deregulation surmised that even if a particular route was served by only one carrier, the fares would remain low because high fares would invite competition. But experience has shown that fares on monopolistic routes average 8 to 10 percent higher than similar routes served by two carriers, which, in turn, are 8 to 10 percent higher than those served by three or more (Borenstein 53, Corcoran and Wallich 119). Borenstein explains this by saying that the expected effects of potential competition are no substitute for actual competition: where lower fares should have resulted from higher passenger volume, routes served by multiple carriers averaged lower per-carrier volumes. And routes with unusually low fares are more likely to be exited by a competitor, while abnormally high-priced routes do not seem to attract a greater number of new carriers than any other routes (53). Under a regulated system, the airlines were run more like utilities than businesses (Business Week 90). Some airlines, such as USAir, notes Borenstein, have been historically known for their poor management, while two of the most profitable, Southwest and American, are recognized as having smart and sophisticated

Category: Business - T