The Changing Airline Industry

GAO analyzed the changes in airline operations following the implementation of airline deregulation, as well as changes caused by other circumstances. Most 1980 data were not yet available, so the analysis was limited to data from 1978 and 1979. Four aspects of the industry's operations were analyzed: traffic, fares, profitability, and productivity.

Since deregulation, airline traffic has increased substantially, outpacing the general economic indicators. Despite a shift in traffic away from the larger airlines, the smaller airlines' share of the market remains relatively small. Air fares have increased before and after deregulation but have not kept pace with airline costs and the consumer price index. The industry's rate of return on investment was higher in the 2 years after deregulation than in the prior 8 years. Two major factors that have contributed to moderating fare increases and increasing airline profitability in 1978-79 were improved airline productivity and favorable economic conditions. While it is hard to measure each factor's impact, it is clear that airline productivity has improved. Air service nationwide was up, as was the number of competitive markets. Single-plane service, which allows travelers to reach their destination without transferring planes, was also up. Small community air service patterns have shifted since airline deregulation. More service was provided to small communities from larger communities, but less direct service was provided between small communities. Through July 1980, 130 communities have been affected by some airline service termination, but the majority continue to receive air service by one or more certificated airlines. Deregulation appears to have had no adverse affect on levels of air safety.