Airline Deregulation Disadvantages

Written by mark slingo
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Airline Deregulation Disadvantages
Deregulation took away federal control of the airline industry, except in regard to safety. (Thomas Northcut/Photodisc/Getty Images)

The term "deregulation" refers to the deletion, abandonment or relaxation of various laws, rules and regulations that can affect an industry. The airline industry was deregulated in the U.S. in 1978 to allow more competition and open up more routes. There have been both pros and cons in deregulating the airline industry; however, there are a number of significant disadvantages that exist.

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Ticket Prices

Although more competition and the law of supply and demand allowed the introduction of cheap "super-saver" ticket prices, this has had a detrimental effect on the airlines with different cost issues involved and the need to keep competitive despite these price wars. There are arguments over how much lower an airline ticket can be, especially when looking at the fact that since deregulation, a full-price fare has actually gone up by around 150 per cent, which is about twice the rate of U.S. inflation over the same period.

Airline Bankruptcies

In the face of increased competition and subsequent lower fares, a number of airlines struggle to compete and find themselves going bankrupt, with notable early casualties being Pan-Am and TWA. With the Internet providing easy access to all ticket prices and options, unlike before when people simply went to a travel or reservation agent, the airlines have to price as low as possible to attract the customer. In the period since deregulation, a number of newer airlines have come and gone, being unable to handle the viciously competitive price wars and meet their costs.

Limited Airport Access

Airport access for airlines has continued to be restricted by federal aviation authorities around the globe. Limited access to landing slots and long-term exclusive gate use by preferred carriers were evident in the first decade after deregulation and continue to be a concern to this day. The major, more dominant airlines, especially the national carriers, are still receiving favourable treatment in some hubs with newer airlines and low-cost carriers being located in the second airport in an area. An example of this is London with no low-cost carriers flying from the main airport Heathrow, but rather being awarded slots at Gatwick but more often Stansted airport.

Staffing Issues and Pension Obligations

With the rise in competition and decrease in costs, staffing problems with airlines have become an increased concern. Airlines have begun to move away from pension obligations and other commitments when having to reallocate funds. This has led to increased union action, thus reducing the airlines' ability to function as well as increasing passenger inconvenience. An example of this would be the British Airways cabin crew strike over job cuts in 2010 which cost the airline £150 million sterling.

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