Positive Effects Of Deregulation In Airlines

The Airline industry is a large and constantly growing industry. It facilitates economic growth, international investment and world trade and is therefore central to other industries as well for globalisation. There are various forces which lead to globalisation in airline industry. Key drivers of change are forces likely to affect the structure of an industry; sector or market. (1).

Although there was a deregulation of the airline industry, the one significant component that did not change was the infrastructure of the airline industry. Constrained by the limitations of the airports and the air traffic control system, airlines did not see significant increases in profits despite the large growth and operations. As the airlines increased the number of flights and structure, the air traffic control system did not experience the same increase. Because the ATC system was still controlled and owned by the government, growth was, and continues to be slow.

The deregulation of the airline industry may have been a win for passengers, but most likely not a win for labor groups. Prior to deregulation the airline industry was highly unionized, enjoying excellent wages, benefits and pensions. Since deregulation there has been a drop in wages and most carriers have eliminated pensions. Also before deregulation, unions would bargain with management at each air carrier and once a contract was reached, the next carrier would begin bargaining from the other contract, to enhance theirs. This continued bargaining from carrier to carrier helped to build better work rules and compensation.

With the passing of the airline deregulation act of 1978, airline carriers were now provided with new options to help expand their route systems and to help the flexibility of innovative pricing structures. This flexibility allowed the carrier to now grow into new markets. Also, deregulation now brought many unwanted and very hostile takeovers and mergers. Many airlines became onboard with this and became giants in the industry.

The Airline Deregulation Act of 1978 opened up the pathway for what we now know air travel to be. It shifted control over air travel from political to a market segment. It was realized that a politically controlled economy did not served public interest. The Civil Aeronautics Board served as the airline regulatory agency which caused air travel to be costlier than it should. Under the CAB, there was constraints on operating and investing in the airline industry.

The events that led the path to deregulation were the Middle Eastern oil embargo of 1973, Inflation, and economic downturn, wide body aircraft, CAB. Because of the Airline Deregulation Act of 1978, many of the regulatory controls were removed such as air passenger eliminated restriction and air cargo domestic route operation, what remained were an antitrust exemption, safety and essential air service, which changed the face of Civil Aviation as we knew it (Greenberg, 2013). The deregulation now allowed airlines to set their own routes and not long after in 1982 the airlines could set their own fares. CAB was abolished in 1984 and airline safety was regulated by the Federal Aviation Administration (FAA). Passengers numbers increased due to

As soon as regulations for airline travel was lifted, new competitors emerged and existing companies scramble to satisfy their market control. With the explosion of airlines offering a list of new services as well as employing nonunion pilots and workers to cut costs and expand profit. Many airlines cater a variety of different social classes from super expensive flights to the cheap "no-frills" flights. The large airline companies, which had originally got accustomed to the government-set fares and the guaranteed that all costs would be cover, found themselves in disarray satisfy the services offered by the new competition. Despite that the deregulation was excellent for competitive airline businesses to offer many services that strategically cut costs for profit. It affected the customers with pricing, additional fees, and complicated service options. As of result, many airlines end up purchasing and merging other airlines to gain market control. The rest of the many airlines businesses filed for bankruptcies and liquidations.

Airline deregulation was the process of removing the government imposed regulations on the entry of new airlines as well the airline fare limiting the competition and growth of the airline industry. In the United States, airline deregulation mainly refers to the Airline Deregulation Act of 1978 signed by President Carter. President Carter signed the Act, but the act was proposed initially during Nixon’s administration, and carried through Ford administration. The airlines industry was growing dramatically during 1960s and mid-1970s. Due to the steady increase in air travel, and strict regulations imposed by the Civil Aeronautics Board, the industry faced three major difficulties- lack of free and stable market, high ticket prices leading to poor productivity, and rising labor and fuel costs. Airlines have adopted many new strategies ever since the industry has been deregulated. The path since the deregulation has been challenging, as the airlines have faced various hurdles such as terrorism, war, recession, high fuel prices over the years impacting the economic structure of the United States. These challenges have raised the question concerning whether the deregulation should be considered or even reversed.

The results of airline deregulation speak for themselves. Since the government got out of the airline business, not only has there been a drop in prices and an increase in routes, there has also been a remarkable increase in airline service and safety. Airline deregulation should be seen as the crowning jewel of a federal de-regulatory emphasis. Prices are down: Airline

With a cost driver strategy and framework (inherent, structural, systemic, and realized (ISSR) the Port Authority sees their cost and get a high-level picture and a breakdown of the airports' expenditures. The causing-factors help the organization achieve a sustainable competitive advantage through performing activities in the identical value chain, same quality as the competitors, but at a lower cost. Nonetheless, performs activities at a higher quality level than its competitors, but matching the cost.

Inefficient pricing by airports creates economic losses to the society in terms of deadweight losses. There is also the question of quality of service in the absence of a regulatory environment.

The years since regulation have been rocky for the airline industry. Airline after airline has declared bankruptcy and either ceased existence or emerged as a weaker airline. The surviving airlines have done so by merging and protecting their territory with tactics not even dreamed of in most industries. Robert Crandall said it best when he noted, "This is a nasty, rotten business (Petzinger,1995)." You would think that with the competition allowed by deregulation that a large number of new names would exist, but that does not seem to be the case. Most Americans still travel on American, Delta, United, US Airways, or Continental (Kane, 2003). The only true champion of deregulation is Southwest Airlines, whose success is paving the way for others such as JetBlue, but the obstacles are enormous. Initially, the airlines went after each other by slashing fares and driving competitors out of business. The industry quickly learned that although this tactic was effective, it was not profitable, and it was more economical to focus on controlling the air out of a few cities (hubs) than to attempt to directly compete in every single market. Since most of the major airlines already had key cities in which they controlled most of the takeoff and landing slots, airlines could charge higher fares and take in greater profits without any real head to head

The elasticity of demand is based purely on current market condition. The tragedy that happened on September 11th had a huge negative effect in the travel industry. It did not only create a disaster but it also affected the fiscal and monetary policies, supply and demand, and it causes staffing problems nationwide. The airline industry is being looked at as unstable due to the current market conditions. The market constantly changes, the purpose of travel has a possibility to change, there is also other transportation available such as bus, car, train, ferry etc. Externalities keep on influencing the elasticity of

The Airline Deregulation Act of 1978 changed the operation of civil aviation forever and for better. The aviation when controlled by the federal government, its potential development was restricted and the air travel was very expensive and could only be afforded by few. The act brought several changes which affected the airlines as well as people.

Managerial economics is about theory meeting practice in the real world. There are many factors to consider when making managerial decisions. Some of those variables include the relationships between total cost, total output, and the price of labor and capital. Investor Words (2016) defines total cost as “the sum of fixed costs, variable costs, and semi-variable costs.” In this paper I will explain how total cost, total output, and the price of labor and capital affect the airline industry.