Causes for Intense Competition in the United States' Airlines Industry

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The Airlines Industry: The domestic airlines industry in the United States has been extremely competitive after it was deregulated in 1978. The intense competition is attributed to the fact that newer more agile carriers with lower cost structures were enabled to compete with established airlines because of the deregulation. In a regulated framework, cost increases in the airlines industry were passed along to consumers through a fixed rate-of-return pricing structure. During this period, the employees of established airlines were overpaid as labor unions obtained more power. Moreover, airlines mainly competed along the lines of service, in-flight movies, and meals because their prices were established by the Civil Aeronautics Board. However, the deregulation contributed to the emergence of an extreme price competition as many carriers reduced their prices significantly through fare promotions. Since then, the airlines industry has become one of the most competitive and profitable sectors in the economy. Overview of the Airlines Industry: As evident in the previous explanation, the airlines industry operates in an extremely competitive market following the 1978 deregulation that enabled newer more nimble carriers to compete with established airlines, particularly through different pricing strategies. In the past few years, this industry has experienced a major shakedown that has significant effects on its operations. The shakedown has had wide effects on the industry's

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