The Evolution of the US Airline Industry Theory, Strategy and Policy
For over three decades the airline industry has continued to maintain a high profile in the public mind and in public policy interest. This high profile is probably not surprising. There does seem to be something inherently newsworthy about airplanes and
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Studies in Industrial Organization Volume 25
Series Editors: H.W. de Jong, University of Amsterdam; Nijenrode, the Netherlands School of Business, Breukelen, the Netherlands W.G. Shepherd, Dept. of Economics, University of Massachusetts at Amherst, USA
The titles published in this series are listed at the end of this volume.
The Evolution of the US Airline Industry Theory, Strategy and Policy by
Eldad Ben-Yosef
A C.I.P. Catalogue record for this book is available from the Library of Congress.
ISBN 0-387-24213-9 (HB) ISBN 0-387-24242-2 (e-book)
Published by Springer, P.O. Box 17, 3300 AA Dordrecht, The Netherlands.
Printed on acid-free paper
All Rights Reserved © 2005 Springer No part of this work may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, microfilming, recording or otherwise, without written permission from the Publisher, with the exception of any material supplied specifically for the purpose of being entered and executed on a computer system, for exclusive use by the purchaser of the work. Printed in the Netherlands.
V
CONTENTS
Foreword
ix
Introduction
1
Overview
9
PART 1: ECONOMIC DEREGULATION
21
Deregulation
23
Aircraft
65
Destructive Competition
103
PART 2: NOISE AND SAFETY REGULATION
127
Social Regulation
129
Noise Regulation
137
Safety Regulation
169
PART 3: COMPETITION
211
Yield Management
213
What Next?
239
On Theory and Policy Implications
261
Epilogue
283
References
289
Index
293
vi
List of Figures Figure 1. Simp m le Hub u Network................................................................................ 43 Figure 2. A Two-Starr Nettwork................................................................................ 47 Figure 3. End-to-End Vertical Integration............................................................... 49 Figure 4. US Airlines Fuel Price Index.................................................................... e 72 Figure 5. New Aircraft Orders................................................................................. 79 Figure 6. Profitt Margins .......................................................................................... 87 Figure 7. Stage II Aircraft—Ratio by Airline—Year-End d 1989.............................. 88 Figure 8. Rate of Change in Aircraft Acquisition Cost ........................................... 89 Figure 9. New Aircraft Deliveries 1985 –1993 ....................................................... 96 Figure 10. World Airlines Net Profits 1985–1995.................................................... 96 Figure 11. US Airlines Aircraft Cost Index 1986-1988.......................................... 100 Figure 12. New Aircraft Orders and Deliveries 1960-1998.................................... 124 Figure 13. Primary Causes of Major Accidents World Fleet 1980-1989 ............... 190 y World Fleet 1988 -1995................................ 191 Figure 14. Fatal Accidents By Type Figure 15. Accident/100,000 De
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