Class notes # 14

Class notes # 14 - Guest Speaker Michael Durham CEO...

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Guest Speaker: Michael Durham, CEO. International Aviation Regulation Inappropriate overregulation of an industry can lead to economic harm to all industries because it distorts economic market forces. Airline Industry Context: Domestic airline industry is pretty fully deregulated from economist perspective (carriers can carry what they want; fliers can fly where they want). Regulation though still predominant in safety issues and how airlines treat customers (politically attractive, but according to Durham, inappropriate). Airline companies formed by carrying US mail, was completely regulated, through WWII. 1978: Alfred Kahn drove 1978 Deregulation Act where airlines could fly wherever they wanted and charge whatever they wanted. Carriers started going out of business, new carriers modeled, industry grew dramatically. Internationally, there is no international deregulation act because of multiple countries involved. Airline deregulation internationally was slow because they didn’t fly domestic routes. If government airline wanted to go foreign routes, needed to negotiate with that foreign government on their behalf. Those rights limited flexibility of carriers to respond to changes in the marketplace and prohibited creativity in terms of pricing and routes because government set those prices. Other result: enormously complicated system of international treaties. Treaty negotiations were very slow. Ended up with international aviation networks and service were out of step with what the market was demanding. At same point that economy was growing and demand for airport transportation was growing, had huge technological strides being made. New aircrafts that could fly more distances and offer services. A lot of negotiations as they evolved centered on aircraft’s ability for route networks. You’ve got a
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This note was uploaded on 11/29/2010 for the course PSC 222 taught by Professor Jing during the Spring '10 term at Rochester.

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Class notes # 14 - Guest Speaker Michael Durham CEO...

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