The research also found that the development of the Travel Promotion Act which is designed to specifically assist in reversing the decline in international travel to the United States.
Problems Arising from deregulation in the Airline Industry
Airline Industry dominated by a limited number of players
Indeed, although there have been many researchers that have praised the presence of deregulation in the airline industry, many have regarded deregulation as the primary source of the demise of the airline industry. According to Goetz & Vowles (2009) as a result of deregulation there have been many mergers and consolidations that have led to a small number of airlines dominating the airline industry in some markets in the United States. In addition, "The widespread adoption of hub-and-spoke networks, in conjunction with industry consolidation and barriers to entry, has led to the establishment of "fortress hubs," where a single airline has come to control 70%, 80%, or even 90% of the market in those cities (Goetz & Vowles 2009, 252)."
The article further explains that the domination of a few players in the industry has resulted in what is referred to as monopoly rent or fare premium that passengers traveling from certain cities have to pay. The author also explain that in addition to these fortress hubs there are also some mid-sized and smaller communities that have experienced substantially increased average ticket fares and reduced levels of service, leading to the development of programs to ameliorate these problems (Goetz & Vowles 2009). Additionally certain regions of the U.S., including the southeast Piedmont area, the upper Midwest, and parts of the Northeast, are now referred to as pockets of pain as a result of the high ticket prices that are present and the poor quality and quantity of flights that are available in these areas (Goetz, 2002; Goetz & Vowles 2009 ). In addition during the time of deregulation in the 1990s, smaller carriers claimed that the larger airlines participated in predatory pricing in an attempt to drive the smaller carriers out of lucrative markets or out of business altogether (USDOT, 2001; Goetz & Vowles 2009). The author also reports that deregulation in the airline industry has led to the instability of the airline industry.
The article further explains that deregulation in the airline industry has led to deregulation in other industries. The authors explain that which has caused many different economic scandals. For instance,
"The global economic crisis of 2008 is the most recent and largest crisis that, many analysts contend, had its roots in the deregulation of the financial services industry, serving as an example of why the implementation of deregulation as a universal economic policy panacea is naive and short-sighted. The weakening of New Deal-era financial regulations and regulatory structures in the name of laissez-faire economic policy, has been a contributing factor in the current financial disaster. The abdication of responsible government oversight has led to conflicts of interest and fraudulent abuse that contributed to the collapse of the financial services industry and the need for a federal government bailout totaling at least $700 billion as of September and October 2008 (Kuttner, 2007; Goetz & Vowles 2009, 255 )."
This aspect of the research reveals that the dominance of a few airlines does not provide a good amount of competition. Competition is important because it assist in the development of high quality products or services at lower prices (Morrison & Winston, 2008). However the lack of competition increases prices and decreases the frequency with which people purchase airplane tickets.
Gas Prices
In addition to the aforementioned problems caused by deregulation and monopolies, there are also other factors that led to the demise of the airline industry. For instance, the price of gas over the past six years has reached astronomical heights. High gas prices lead to higher ticket prices because airlines have to chare more to make up for the extra cost of jet fuel. Although many companies suffered a great deal during the height of high gas prices Southwestern Airlines was able to keep fare prices low because the company had made an agreement with its supplier and locked in a lower price for gas.
According to Maxon (2008) even many airline companies have steadily increased fares, these increases have not proven effective in balancing out the high price of gas which costs airlines billions of dollars each year. The article further explains that "American Airlines was already complaining loudly about oil prices in...
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