The evolution of the airline industry

Abstract

Since the deregulation of the airline industry, the intensity of the debate over its controversial issues has intensified. Economic regulation provided a certain stability for both passengers and the industry: fares were predictable and uniform, carriers' earnings fluctuated but bankruptcies were averted through mergers sanctioned by the Civil Aeronautics Board, and air safety steadily improved. Deregulation changed everything. A new fare structure took shape. Travelers faced a variety of fares and concomitant travel restrictions. New carriers entered the industry, but nearly as many left, through merger or bankruptcy. As financial pressures mounted, safety practices came into question. Many critics called for a return to some form of regulation. The evolution and likely direction of the industry needs to be reassessed anew. That is the purpose of this book. It proceeds by providing a comprehensive empirical profile of the industry as it has evolved both before and since deregulation. It identifies the central issues facing travelers and carriers and assesses their severity and underlying causes. It develops a basis for understanding the industry's evolution and the ways the industry may eventually adapt to the unregulated economic environment. It also discusses whether government policy can play an effective role in improving airline performance. It concludes that the evolution of the airline industry is proceeding in a direction that will preserve and possibly enhance the benefits of deregulation for travelers and carriers; and that the federal government's policy should expand deregulation to include international travel.