Deregulation Act of 1978 Before Term Paper

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They have, on average, a thirty-five to forty percent increase in the number of scheduled departures and hub-and-spoke operations have made an increased number of destinations available to them. Airlines have cut frills during our current economic downturn, but the success of no-frills, low-cost airlines such as Southwest Airlines which do not offer many traditional amenities indicates that a substantial proportion of passengers are more swayed by price than comfort (Airline Deregulaton Act) .By far the most important aspect of customer service, safety, has increased under deregulation. Accident rates during the twelve-year period from 1979 to 1990 were twenty to forty-five percent below their average levels in the six or twelve years before deregulation (Kahn, Airline deregulation). Moreover, by displacing a certain amount of automobile travel, the low airfares made possible by deregulation have saved many more lives than the total number lost annually in air crashes.

Surprisingly, consumers enjoy lower prices and greater access to services with fewer carriers. Deregulation did lead to some new low-fare carriers such as the highly successful Southwest Airlines and JetBlue Airways, but as of 2002, give major airlines controlled seventy-three percent of the market (Airlines, 2002). This is due to the failure of older, high cost airlines that could not change from inefficient, high cost models to efficient, low cost models (Airline Deregulation Act). Exposure to competition led to heavy losses and conflicts with labor unions at a number of carriers. Between 1978 and mid-2001 nine major carriers, Eastern, Midway, Braniff, Pan Am, Continental, America West Airlines, and TWA) and over 100 smaller airlines had gone bankrupt or been liquidated.

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Mergers and acquisitions among the survivors have created a small club of "mega-carriers" and oligopolistic conditions in many markets. But, this condition is more likely to be attributable to pre-deregulation restrictions that linger to this day (Airline deregulation: Barriers to entry continue to limit competition in several key domestic markets, 1996). The Federal government limits takeoff and landing slots at major airports such as Chicago, New York and Washington and the established carriers hold nearly all of the slots. Further, the established airlines benefit from long-term, exclusive-use gate leases and are not subject to perimiter rules at New York's LaGuardia and Washington's Ronal Reagan because their hubs are located close enough to these airports so that they are not limited by perimeter rules. All These barriers impede the entry of newer airlines into key markets in the East and upper Midwest regions of the U.S.

In conclusion, airline deregulation has worked and consumers are better off. Consumers pay lower prices and have greater access to services thanks to more efficient capacity planning. Extending the ability to fly to the masses has expected implications for service. Even so, the problems are not even close to approaching the breakdown in safety and service claimed by deregulation opponents. Dominance by a limited number of suppliers is an issue and limits consumer choice. But, this issue more likely reflects continued government control over airports rather than the deregulation of airlines themselves......

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