Deregulation of the Airline Industry

Paper Summary:

This paper investigates the considerable effect deregulation has had on the airline industry in terms of competition and how airlines have had to formulate defined strategies to improve their economic performance in order to remain competitive. The history of deregulation in Australia, Europe and the United States is reviewed, as well as the more recent developments in the industry as a result of deregulation. The various strategies available to airlines are discussed, along with how these counteract the competitive forces of their rivals, in both the domestic and international domains. It is also argued that airline managers must monitor competition and industry forecasts, develop initiatives to reduce costs while simultaneously maintaining or increasing yield to ensure long-term profitability.

Outline
Introduction
Outcomes of Deregulation
Intense Competition
The Economic Characteristics of an Airline
Managing Economic Performance and Competition
Conclusion and Implications

From the Paper:

"As governments began to consider that current regulations in the airline industry were too restrictive, deregulation (or liberalisation) of economic and political regulations was thought to be the response to their desire to stimulate competition. Largely, the United States pioneered the implementation of regulatory reform. US government control over domestic airfares and entry into the market had ceased in the early 1980s, immediately encouraging new entrants into the domestic airline industry. As a result, airfares fell as competition grew. In Europe, the European Court of Justice ruled that government intervention concerning airfares breached competition law, leading to the staged deregulation of airfares and airline services (Hutcheson, 1996). On the Australian scene, interstate regulation was phased out in 1990, while intrastate regulation of routes and fares remained predominately intact to stabilise and scrutinise essential regional services."

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