Content area
Abstract
This dissertation addresses three areas of market performance affected by the Airline Deregulation Act of 1978: price, capacity, and profits. Since other factors, such as a depressed economy and rising oil prices, also exerted an impact on these performance characteristics, it is necessary to design a test which will take into account such influences.
Chapter One discusses the history of the airline industry. Government regulation of the industry was quite limited prior to 1938, which was mostly the provision of airmail subsidies. Then, forty years of detailed regulation of rates and entry was followed by a gradual relaxation of such controls, pursuant to the Airline Deregulation Act. Today, regulation has virtually ceased.
Chapter Two reviews the literature on regulation during the enforcement period of the CAB. In general, these works concluded that restrictions on entry and regulation of fares elevated fares above competitive costs and induced airlines to nonprice competition.
Chapter Three analyzes the effects of deregulation on fares, finding that the overall real fare level has declined since deregulation. Moreover, short-haul fares have tended to rise relative to long-haul fares, bringing the fare structure more in line with carrier's cost.
Chapter Four considers the effect of deregulation on capacity. Airlines have increased the number of seats in various aircraft. What is even more important, the carriers have utilized peak-load pricing techniques to improve their load factors.
Chapter Five investigates the impact of deregulation on industry profits. Since regulation diverted carrier rivalry into cost-increasing service competition, deregulation should not have affected profits significantly, provided increased carrier efficiency was reflected in sufficiently lower airline fares. As expected, industry profits were not found to have been affected to any appreciable extent by deregulation.
Chapter Six summarized the dissertation and offered some concluding observations. Deregulation appears to have contributed to improved market performance by channeling competition into efficiency-enhancing activities, and customers have benefitted by service-fare alternatives more in line with their preferences.
