1. Has airline deregulation been a success? Be sure to take into account the acc
ID: 1143510 • Letter: 1
Question
1. Has airline deregulation been a success? Be sure to take into account the accessibility and flight amenities, as well as price. What, if any, effects do you think rising fuel costs will have on airline regulation/deregulation?
2. To what extent do you think U.S. income distribution is determined by economic factors? Use the material developed in this unit to inform your (positive) position. To what extent do you think the U.S. income distribution should be determined by economic factors? Use the material developed in this unit to inform your (normative) position.
Explanation / Answer
I would call it a mixed success; there is more competition in the industry, which has allowed fares to be lower (fares on average cost around the same amount as they did pre-deregulation, but with annual salaries being higher and also the value of the dollar being lower than it was 25 years ago, a $100 fare in 1978 would be more expensive than a $100 fare today). On the downside, service has suffered and some cities have lost commercial airline service (mainly as the result of the CAB not being around to force airlines to operate unprofitable routes). With the CAB, airfares and routes were regulated, so if three airlines flew the same route, the only way they could attract pax was by the inflight service. Those excesses of the past are what helped to lead many of the legacy carriers to the financial positions they are in today, as they tried to kepp the past alive in an age that did need it. You have also had a lot of people that have failed in the industry as well. I remember reading that since deregulation somewhere close to 200 airlines in the US have folded (either they were exsisting carriers that folded, new-entrants that folded, or startups that never even took off).
Dergulation has been a total success. However, the major carriers have STILL not adapted to the new way IMO. The majors will learn eventually that hub and spoke doesn't work, and that they will need to adopt the Loco model in some aspects.....Delta and United are doing this to some extent, it is too early to gauge their success.
We are also starting to see Locos compete with themselves....WN seems scared of B6 and they will be forced to battle it out eventually. I would hate to have a hub at an airport where WN and B6 were battling!
But whenever there's regulation, a push for deregulation follows. In the late 1970s and 1980s, regulatory reform became popular politically. The reasons varied: Sometimes, industries thought they could be more profitable with less government intervention. Sometimes, consumers and public-interest groups thought regulators had grown too cozy with the industries they regulated. Other times, regulations didn't work or became inefficient as years passed. When inflation was bad, businesses felt that price regulations made it hard for them to respond quickly enough.
Deregulation can be accomplished legislatively, with Congress passing new laws or amending old ones. Or it can be handled administratively, with agencies writing new rules or choosing not to enforce some. Usually, deregulation isn't complete: Some regulations are removed or eased, but others remain.
Deregulation doesn't always work as expected. Some economists believe that deregulation usually leads to someone being hurt
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The most frequently cited statistics come from the U.S. Census Bureau
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