THE DEMISE OF THE CROSS-SUBSIDY CONCEPT IN U.S. DOMESTIC AIR TRANSPORTATION: REASONS AND IMPLICATIONS

This paper discusses the U.S. Civil Aeronautics Board's (CAB) declaration in its Phase 9 Decision of the Domestic Passenger Fare Investigation (DPFI) that cross subsidy is inherently unworkable given the present structure of the U.S. air transport industry, and that the domestic air fare structure "should be more closely aligned to the cost structure than it presently is and, indeed, that our long-term goal should be the creation of a fare structure that is entirely cost based". The background to this policy reversal is examined, and some of its longer-run implications are traced. This policy shift was fundamental to the general shift in attitude toward regulation that has recently been observed within CAB. Also, it explains the degree of success that has been achieved in obtaining legislative changes in basic parameters of the U.S. airline regulatory structure. The generalization of these results to other areas of regulation is also discussed.

• Corporate Authors:

  RAND Corporation

  1776 Main Street, P.O. Box 2138
  Santa Monica, CA  United States  90407-2138
• Authors:
  • Eads, G C
• Publication Date: 1977-12

Media Info

• Pagination: 23 p.

Subject/Index Terms

• TRT Terms: Air transportation; Fares; Regulations; Subsidies; Transportation policy
• Subject Areas: Aviation; Law; Policy;

Filing Info

• Accession Number: 00176735
• Record Type: Publication
• Source Agency: RAND Corporation
• Report/Paper Numbers: P 6063
• Files: TRIS
• Created Date: Jul 19 1978 12:00AM