Please discuss the development of the U.S. airline industry in the era of economic regulation and the factors leading to deregulation. Describe the post-deregulation expansion, consolidation, and concentration of the industry, as well as the current trend of intra-industry agreements. Airline deregulation changed the way airlines operated forever, liftings restrictions and creating competition within the industry. Signed by President Jimmy Carter, the Airline Deregulation Act of 1978 phased out the Civil Aeronautics Board and immediately lifted restrictions on fares and access to routes (Smithsonian, 2007). As a result, competition was formed, driving fares down. To increase airline efficiency, the hub-and-spoke system was also created, centralizing flights from major airports. Airline deregulation is also said to be the rise of the low-cost carrier (Unnikrishnan, 2015). Post-deregulation, air travel has increased drastically, due to lower fares. Airlines in the market have also consolidated, either by merging or by forming alliances, such as Oneworld or Star Alliance. These alliances allow joint efforts by multiple airlines within to get travelers to destinations without hassle. There are many economic effects of deregulation still being seen today. Deregulation triggers new entrants into the industry, providing new opportunities for the industry through new aircraft and routes (Cetin & Eryigit, 2018). The air services become more accessible, raising the quantity demanded. Competition and price deregulation together cause a decrease in flight prices, benefiting the flying public. Considering the way that airline deregulation changed the industry, its difficult to think of how the industry would be without airline deregulation. Air travel could have been available to only the rich like before, due to high prices.
- Fall '16
- Kelly Lawton
- Sabre, Low-cost carrier, Sabre Airline Solutions, Hybrid Carriers