AIRLINE COMPETITION: A CONSUMER PERSPECTIVE

Since Congress passed the Airline Deregulation Act in 1978, air passengers have saved $100 billion, 68% more people are flying, and average inflation-adjusted air fares are 20% lower. But because the government-controlled parts of the air transportation system have not expanded as fast as the airlines, airlines find themselves blamed for congestion, delays, and a perceived lack of competition in some cities. A General Accounting Office report found that at 15 "concentrated" airports, passengers pay air fares that are 27% higher than the national average. Airlines' hub-and-spoke systems are alleged to contribute to airport concentration. But despite popular impressions, hub cities as a group have fare levels only slightly above those on non-hub cities. In 1988, the average fare per passenger mile at the 30 largest hub airports was just 1.5% above the national average. Furthermore, none of the various government and private studies on airline competition have produced evidence that airlines are earning unusually large profits. Air fares vary widely from city to city because passengers in different cities choose different types of service with different costs. Short-distance flights and nonstop service are more expensive. Claims of increased concentration are also suspect. A 1988 Congressional Budget Office study found that despite ten major mergers, the average number of airlines serving city-pair markets rose from 2.4 in 1983 to about 2.5 in 1987. A decade ago, 69% of passengers could choose from two or more airlines on a route; in 1988, 89% had that choice. Government policies have inhibited expansion of the airport and air traffic control system. The resulting restrictions on landing slots at 4 major airports do create problems, but they could be remedied by creating more landing slots. Other alleged "barriers to entry," such as frequent flyer programs, computer reservation systems, commuter code sharing, and travel agent volume incentives, also bring passengers tremendous benefits. Moves to curtail these business practices would likely harm consumers.

• Corporate Authors:

  Citizens for a Sound Economy Foundation

  470 L'Enfant Plaza, SW, East Building, #7112
  Washington, DC  United States  20024
• Authors:
  • Ellig, J
• Publication Date: 1990-1-24

Media Info

• Features: Figures;
• Pagination: 33 p.

Subject/Index Terms

• TRT Terms: Airlines; Competition; Consumers; Deregulation; Economic impacts; Fares; Hub and spoke systems; Policy; Traffic congestion; Traffic delays
• Uncontrolled Terms: Congestion; Restrictions
• Old TRIS Terms: Government policies
• Subject Areas: Aviation; Economics; Highways; Policy; Society;

Filing Info

• Accession Number: 00491963
• Record Type: Publication
• Files: TRIS
• Created Date: Mar 31 1990 12:00AM