Super-saver fares and frequent flier miles are just some of the rewards fliers have received from intense competition in the airline industry. Before deregulation of the industry in 1978, bureaucrats at the Civil Aeronautics Board regulated it like a utility - setting prices designed to give airlines a set rate of return on their investment and deciding who could compete with whom.

A detailed analysis of 17 years of data shows that although deregulation has wreaked havoc on some previously protected carriers, consumers have benefited enormously. Economists found that after adjusting for inflation:

• Air fares have fallen 33 percent since 1976, and are now about 22 percent lower than they would have been under regulation, saving air travelers $12.4 billion annually.

• With such changes in service as more frequent flights and fewer trips that require changing airlines, the annual benefits to passengers from deregulation rise to $18.4 billion a year.

• Despite occasional spectacular accidents, the chance of dying in a crash keeps falling for travelers on both small commuter airlines and national carriers.

Although some national carriers - most notably Pan Am, Eastern and Braniff - have fallen by the wayside, innovative new carriers like Southwest have sprung up and others have consolidated to improve efficiency. Eliminating restrictions on entry into new markets has increased the number of competitors at the route level - by 70 percent for flights over 2,000 miles. As a result, fares are lower for most travelers.

Some passengers are paying higher fares than before, because under price regulation passengers on longer flights subsidized unprofitable short-haul fares. Also, flights are more crowded. Under regulation, since airlines could not compete on price, they competed on service, such as more frequent flights with less than full loads of passengers on each trip.

Today, price competition makes flying affordable for millions of people who used to take the bus. In 1993, for example, almost half a billion U.S. passengers flew almost half a trillion miles.

Following the lead of the United States, Japan, Canada and Australia have already deregulated their fares, and the countries of the European Union plan to deregulate in 1997.

Source: Steven A. Morrison and Clifford Winston, The Evolution of the Airline Industry (Washington, DC: Brookings Institution, 1995).