Regulation Policy

Airline Re-Regulation

Air fares have fallen dramatically since airlines were deregulated 20 years ago. Yet the Department of Transportation is toying with re-regulation through new "guidelines" critics say would make it more difficult for airlines to slash fares and add flights when a new competitor enters a route.

Northeastern University economist Steven Morrison and Clifford Winston of the Brookings Institution have calculated that the average number of carriers per airline route has risen from 1.7 to 2.2 since deregulation. This increased competition has decreased fare prices in all competitive situations -- from large hub to non-hub cities.

  • Fares dropped an average of 29 percent in large hub markets between 1976 and 1996.

  • They fell an average of 32 percent in medium hub markets and 17 percent in small hub areas.

  • At non-hub airports, the decline was 4 percent.

  • Air travelers now save $20 billion a year due to deregulation, according to Morrison and Winston.

At the urging of a number of small airlines, the guidelines would allow the federal government to haul into regulatory court any airline which offered a discount to a customer in order to compete with a new-entry airline.

The Transportation Department protests that it is not trying to re-regulate airlines, but many economists disagree. "If this isn't re-regulation, then I don't know what is," says James Gattuso of the Competitive Enterprise Institute.

Source: John Berlau, "Government Gets Tough With Airlines," Investor's Business Daily, July 20, 1998.

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