Airline deregulation is a victim of its own success

Frequent fliers bemoan flight delays and often-crowded planes and airports. To some extent they might want to blame deregulation for their air travel headaches. That's because freeing up competitive forces in the airline industry has been so successful that the number of passengers has nearly tripled since 1978.

Air travel is now within the reach of many Americans who could not afford it prior to deregulation. Back when the federal government controlled prices and routes, air travel connected fewer cities, offered less convenient schedules and cost much more.

  • On average, fares are down 27 percent on an inflation-adjusted basis since deregulation took effect, according to economists Steven A. Morrison at Northeastern University in Boston and Cliford Winston at the Brookings Institution.

  • Some 80 percent of passengers are paying less than they would have under the old government-set price system.

  • Many more cities are now connected by air – thanks to the hub-and-spoke arrangements airlines instituted after deregulation.

  • The number of domestic passenger-miles flown in the U.S.A. has skyrocketed from 183 billion in 1978 to 480 billion last year.

    The researchers estimate the net benefit of deregulation at more than $20 billion a year – or about $80 for every American man, woman and child.

    The inconveniences that travellers complain of are largely attributable to governments' remaining presence in aviation. Specifically, airports and the air traffic control system are still owned and operated by government agencies. As a result, experts say, they have neither the incentive nor the flexibility to operate efficiently – and rationing of services means customers must wait.

    They warn that things will only get worse until airports and the air traffic control system are privatised.

    Source: Virginia Postrel (Reason Foundation), Economic Scene: Don't Blame Deregulation for Airline Problems; Blame Not Enough Deregulation, New York Times, October 5, 2000.

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