[Advanced in the name of free-market ideology, deregulation keeps ending up
as a mechanism for insiders to make super-profits at the expense mostly of
the working class. When word gets out about the latest rip-off in the name
of deregulation, the bourgeois press takes the position that the problem is
not deregulation but the half-assed way it is carried out. Sort of like the
"best of intentions" argument used to defend the notion that the war in
Vietnam was not cold-blooded imperialism. We have heard this argument made
with respect to the rolling blackouts in California. What's interesting is
that airline deregulation ended up accelerating monopolistic trends even
though it was instituted upon the basis of Chicago school orthodoxy
advanced by liberal Democrats and Republicans alike.]
Paul Dempsey and Andrew R. Goetz, "Airline Deregulation and Laissez-Faire
Mythology":
The intense destructive competition unleashed by deregulation has reduced
the number of major competitors at the national level through waves of
bankruptcies and mergers, to the point that the airlines have become, in
the words of Alfred Kahn, an "uncomfortably tight oligopoly."
There were 51 airline mergers and acquisitions between 1979 and 1988. More
than 20 of those were approved by DOT after 1985, when it assumed
jurisdiction over mergers. Fifteen independent airlines operating at the
beginning of 1986 had been merged into six megacarriers by the end of 1987.
The six largest airlines increased their passenger share from 71.3 percent
in 1978 to 80.5 percent in 1990. The eight largest airlines accounted for
81 percent of the domestic market in 1978 and 95 percent in 1991.
The Department of Transportation approved every airline merger submitted to
it after it assumed the Civil Aeronautics Board’s jurisdiction over
mergers, acquisitions, and consolidations on December 31, 1984. The Airline
Deregulation Act of 1978 insisted that the agency guard against "unfair,
deceptive, predatory, or anticompetitive practices" and avoid "unreasonable
industry concentration, excessive market domination" and similar
occurrences that might enable "carriers unreasonably to increase prices,
reduce services, or exclude competition." But these admonitions fell on
deaf ears at DOT, which never met a merger it didn’t like.
For example, DOT approved Texas Air’s (i.e., Continental and New York Air)
acquisition of both People Express (which included Frontier) and Eastern
Airlines (which included Braniff’s Latin American routes), United’s
acquisition of Pan Am’s transpacific routes, American’s acquisition of
AirCal, Delta’s acquisition of Western, Northwest’s acquisition of Republic
(itself a product of the mergers of North Central, Southern, and Hughes
Airwest), TWA’s acquisition of Ozark, and USAir’s acquisition of PSA and
Piedmont.
Nor are these likely to be the last of the mergers. By the end of the
century, there may be as few as nine or ten global megacarriers.
We are left with a situation aptly summarized by airline analyst Morton Beyer:
"The 11 major airlines have shrunk to eight; the eight former local service
carriers are now two and they are trying to merge; the eight original
low-cost charter airlines have been reduced to one, through bankruptcy and
abandonment; 14 former regional airlines have shrunk to only four; over 100
new upstart airlines were certificated by the CAB and about 32 got off the
ground and most of those crashed, leaving only a handful still operating;
of the 50 top commuters in existence in 1978, 29 have disappeared. .
"Today, the top 50 commuter carriers who constitute 90 percent of that
industry are captives of the major carriers, in part or in total owned,
controlled, and financed by the giant airlines and relegated to serving the
big airlines at their hubs."
Louis Proyect
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