Thursday, February 02, 2006

Deregulation: How big is your sandwich?

With the news of Delta's emergence from bankruptcy and Jet Blue’s troubles, you might wonder whether airlines’ topsy-turvy financial situation is good for passengers. Wouldn’t service be better if the airlines could make a long term plan?

It might, but prices would certainly be higher, and service would not necessarily be better. Under regulation, airlines couldn’t compete on price so they attempted to offer better and better services and, especially, sumptuous meals. But the Civil Aeronautics Board could not let any airline have an unfair advantage, so the government regulated service, too. In the 1970s the federal government even regulated the size of the sandwiches served in flight.

All that came to an end in the US with the Airline Deregulation Act of 1978 and the reorganizations that followed.

One of the spurs to deregulation was Laker Airways, whose transatlantic flights from London to the US lured passengers away from Pan Am and British Airways. While discount airlines have followed in the jet trails of Sir Freddie Laker by offering low cost domestic service, the world still has no substantial low fare international airline. That was Laker’s niche in the 1970s.

For the best single book on US deregulation, see Martha Derthick's The Politics of Deregulation:
http://www.amazon.com/gp/product/0815718179/ref=sid_dp_dp/002-2902995-7761651?%5Fencoding=UTF8&v=glance&n=283155

For background on Freddie Laker, see:http://news.bbc.co.uk/1/hi/uk/2283244.stm

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