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.
RAND Corporation1776 Main Street, P.O. Box 2138
Santa Monica, CA USA 90407-2138
- Eads, G C
- Publication Date: 1977-12
- Pagination: 23 p.
- TRT Terms: Air transportation; Fares; Regulations; Subsidies; Transportation policy
- Subject Areas: Aviation; Law; Policy;
- Accession Number: 00176735
- Record Type: Publication
- Source Agency: RAND Corporation
- Report/Paper Numbers: P 6063
- Files: TRIS
- Created Date: Jul 19 1978 12:00AM