Airline Deregulation

The Airline Deregulation Act of 1978 phased out the federal government's control over airfares and services, relying instead on competitive market forces to determine the price, the quantity, and the quality of domestic air service. In an earlier report (GAO/RCED-91-13), GAO indicated that between 1979--the earliest year for which reliable data on fares are available--and 1988, the average fare per passenger mile, adjusted for inflation, fell by nine percent at small-community airports, 10 percent at medium-sized-community airports, and five percent at large-community airports. The largest decreases were at airports in the Southwest, regardless of the community's size. This report (1) updates GAO's analysis of airfare trends and (2) compares changes in the quantity, the quality, and the safety of air service since deregulation at airports serving small, medium-sized, and large communities. GAO summarized this report in testimony before Congress; see: Domestic Aviation: Changes in Airfares, Service, and Safety Since Airline Deregulation, by John H. Anderson, Jr., Director of Transportation and Telecommunications Issues, before the Senate Committee on Commerce, Science, and Transportation. GAO/T-RCED-96-126, Apr. 25 (17 pages).

GAO noted that: (1) the average fare per passenger mile is 9 percent lower at small-community airports, 11 percent lower at medium-sized airports, and 8 percent lower at large-community airports; (2) the largest increase in fares occurred in the Southeast and Appalachian regions, and the largest decrease occurred in the West and Southwestern regions; (3) this geographic disparity exists because of the intense competition between low-cost, new carriers in the west and dominant, high-maintenance carriers in the Southeast; (4) the overall quantity of air service at airports has increased, but large communities have experienced the largest increase; (5) air service quality is difficult to measure and depends on the number of destinations served by nonstop flights and one-stop connections, and the type of aircraft used; (6) air service quality since deregulation has been mixed largely due to the airlines hub networks and greater use of turboprop aircraft; and (7) the overall accident rate since deregulation has dropped, but there are no statistically significant differences in air safety trends for any of the airport groups.