The US airline industry has been taken as an in-depth case study. This thought-provoking book chronicles the evolution of the airline industry and explains what lies ahead for airlines across the globe. The authors present compelling evidence on how the paradigm shift that is taking place in the airline industry is linked to the big-bang approach to deregulation.
There are lessons to be learned from the US as Europe and Asia undergo the (airline) deregulation experience from a public policy as well as a corporate perspective. Deregulation and Competition: Lessons from the Airline Industry also addresses the crucial question of what will happen to the airlines that are in turmoil. In addition to the comprehensive analysis of the airline industry's evolution, the authors draw from extant ...
Chapter Three: Development of Fortress Hubs
Development of Fortress Hubs
One of the primary justifications for airline deregulation in 1978 was that a large number of new low-cost airlines were expected to enter the high-price markets and drive down the price of flying. Anticipating the growth of new low-cost airlines, the legacy airlines that existed before deregulation were permitted to either lower their prices initially by as much as 50 percent, or to increase them by no more than 10 percent.
Airline deregulation was based on the premise that “there were no barriers to entry that would prohibit new low-fare airlines from entering high-price markets.” But the reality turned out to be a far cry from that. Entry into markets dominated by the legacy carriers was extremely difficult. Following ...