Enhancing the Performance of the Deregulated Air Transportation System

Abstract

IN A DRAMATIC BREAK with past policy, the U.S. commercial air transportation system was deregulated in 1978.Although deregulation was initially popular, primarily because it led to lowerfares, public uneasiness has recently set in.1 Airport congestion and flight delays, increased concerns with safety, and rising fares in less competitive markets have all been attributed to the change in the regulatory environment.But, as illustrated in figure 1, deregulation is only one among many influences on the air transportation system.Equally influential are technological change, macroeconomic performance, and public policies besides those having to do with economic regulation.Because all these influences are interdependent, each must operate in accord with the others or the system can become disrupted.This paper focuses on improving the air system by aligning public policy regarding mergers, airport pricing and investment, and safety with the traffic volumes and patterns that exist under deregulation.WeWe are grateful to Robert Hahn, Richard Johnson, Joan Winston, and the conference participants for their comments and to Leslie Siddeley and Carol Evans for research assistance.