Deregulating the Airlines

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MIT Press, 1985 - Business & Economics - 243 pages
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The airline industry has been buffeted by the forces of deregulation since themid-1970s. Many new firms have entered, some with different price and operating philosophies andsome of these have thrived. Other airlines have gone bankrupt. Overall the real cost of air travelhas declined considerably; however, the effects have varied dramatically from market to market.Exactly how was this massive experiment envisioned and planned? How has it worked? And how will itwork in the long run?Deregulating the Airlines narrates and analyzes the decisions taken by theCivil Aeronautics Board during the transition to deregulation and the reasoning behind the AirlineDeregulation Act of 1978. It provides many comparisons of the industry before and after deregulationand uses those data to test the various hypotheses that scholars and politicians have advanced abouthow markets would behave if regulation were removed. Its findings provide information on both thedemand and the cost side that will be important in molding the long-run equilibrium of the industry,and it discusses how quickly the industry is moving toward that equilibrium.For policymakers andstudents of regulation in particular, this study provides a unique case for contrasting theoperation of an industry under close regulatory control and its operation free of such controls. Itis able to make use of an unusually large volume of data on the costs, operations, and prices ofindividual firms to show how markets work and how regulation works.The book's in-depth analysis ofthe impact of policy changes in the airline industry is drawn in part from the authors' activeinvolvement in implementing the new policies. Elizabeth Bailey is Dean of the Graduate School ofIndustrial Administration at Carnegie-Mellon. Previously she was a commissioner and vice chairman atthe Civil Aeronautics Board. Daniel Kaplan is director of the Board's Office of Economic Analysis.David R. Graham, manager of the Defense Economics Program at the Institute for Defense Analysis, wasa Board economist.Deregulating the Airlines is tenth in the series, Regulation of Economic Activity,edited by Richard Schmalensee.

 

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Contents

Regulation of the Airline Industry
11
in 1978
15
Conclusion
26
Act of 1978
35
Chapter 3
41
trunks locals and new entrants
49
PeakLoad and Other Pricing Practices
56
Chapter 4
67
Conclusion
110
Conclusion
123
Other Operational Changes
139
Chapter 9
153
The Changing Nature of Market Competition
166
Carrier Agreements
180
Conclusion
193
Notes
221

Changes in Service Patterns
82
Regulation and Labor Costs
95
airlines
109

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About the author (1985)

Elizabeth E. Bailey is Dean of the Graduate School of Industrial Administration at Carnegie Mellon University.

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