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COMPETITION AND PERFORMANCE IN THE AIRLINE INDUSTRY

Authors

Abstract

The paper examines the airline industry ten years after the Airline Deregulation Act of 1978. A brief review of the historical background of regulation and the changes leading to the Airline Deregulation Act is presented. A number of studies are cited that conclude that airline perfor- mance has improved since the Civil Aeronautics Board days. The author agrees with these conclusions but goes on to suggest that it is time to begin comparing the airline industry today with the standards of performance associated with perfect competition instead of the previous regulatory period. A standard of competitive performance is suggested. The traditional p=mc=ac performance is complicated because mc and ac decline for any airline flight until the plane is full or has a 100% load factor. The author suggests p=acat load factors are not yet reaching loo%, it is suggested that some policy modifications might help improve performance further. An- titrust is examined and some other institutional policy changes are sug- gested. Copyright 1990 by The Policy Studies Organization.

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