The Effects of Deregulation on the Airline Industry

Abstract

In recent years there has been debate over whether or not airline deregulation has accomplished the desired economic outcomes envisioned in 1977 and 1978. The debate has resulted in a cry for re-regulation by some policymakers, such as the United States Department of Transportation. The purpose of this study will attempt to clarify the debate over deregulation by addressing such issues as pricing, concentration of air carriers, and safety. By conducting a t-test it will be possible to determine if there is a statistically significant difference in pricing of pre- and post-deregulation airfares. In addition to examining the issues of pricing, concentration, and safety the study will identify how airlines have been forced to adapt to the changes in the airline industry. Delta Airlines will be used a case study. Through such an investigation I was able to see that airlines of all sizes are forced to establish a variety of offensive and defensive tactics to survive in a much more competitive business environment. The study ends with an explanation of how airlines again are forced to alter their operations as a result of the terrorist attacks on the United States on September 11, 2001