Summary
Association Lecture
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Extract
Aviation policy: past and present.
1. Introduction
Airline deregulation has been a symbol of the trend toward less expansive government over the past quarter century. The move from economic regulation to deregulation has delivered on its efficiency promises. Although there are only a handful of large carriers remaining after the consolidations of the 1980s and 1990s, there have been enormous benefits to consumers in terms of lower prices and more convenient schedules. However, airline competition remains imperfect, particularly at hub airports. The nature of these imperfections is explained better by models of oligopolistic behavior than by the contestability theory. Paradoxically for this industry, 19 men and four airplanes brought the drive to shrink government to an abrupt end on September 11, 2001. The resulting tragedy has dramatized the public-good aspects of protection from terrorist attack and the need for information sharing by law enforcement authorities. Emergency legislation sought to provide financial stabilization for the airline industry in the short run. Subsequent legislation addresses the need for stronger aviation security in the long run. This paper begins with a look at past policy. It describes the nature of aviation regulation and the causes and beneficial consequences of economic deregulation. It then evaluates the nature and extent of competition in the deregulated marketplace. Finally, it examines continued areas of governmental intervention in aviation, including new security and bailout policies. 2. Th...See the full content of this document
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