NCPA - National Center for Policy Analysis

Completing Airline Deregulation

December 30, 1998

Economists are nearly unanimous on the benefits since U.S. airline deregulation began in the 1970s. The flying public is being served better and more cheaply since the regulatory straight- jacket was loosened.

But some public policy experts contend there is more to do -- particularly in the international airways market.

George Mason University's Kenneth J. Button notes that international air travel is still heavily regulated and the U.S. domestic air travel market remains closed to foreign competition. Recently, European countries relaxed controls on international flights between EU countries -- a move which has greatly benefited air travelers there. He urges the U.S. to take the same steps.

  • In Europe, at least 90 percent of passengers are traveling at lower real fares than they would have in 1993.
  • The number of routes flown within the EU has risen.
  • Competition has arisen as the number of routes served by one or more of the airlines has increased.

But air service between the U.S. and most other nations remains governed by treaties that set routes and fares and restrict competition. Many of the treaties are more than 50 years old.

Button advocates liberalizing international traffic -- particularly between the U.S. and Great Britain and Japan, the two largest overseas markets served by U.S. airlines. He also thinks it would be a good idea for the U.S. to revoke rules banning foreign airlines from carrying passengers between U.S. cities, and rules barring foreign firms from owning more than 25 percent of a U.S. airline.

Increasing competition, he says, would put more downward pressure on air fares.

Source: Perspective, "Freer Air Travel," Investor's Business Daily, December 29, 1998.


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