Lower Airline Costs per Passenger Are Possible in the United States and Could Result in Lower Fares

CED-77-34: Published: Feb 18, 1977. Publicly Released: Feb 18, 1977.

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At the request of the Chairman of the Senate Subcommittee on Administrative Practice and Procedure, a study, entitled "Airline Regulation and Market Performance", by Theodore E. Keeler, was evaluated, extended, and updated. The study compared airline fares regulated by the Civil Aeronautics Board (CAB) in 1969 with estimates of fares the airline industry might have charged had it not been regulated. The validity of the study results was evaluated, and annual national estimates were made for the years 1969 through 1974.

Airlines in the United States regulated by the CAB could have operated at a lower total cost per passenger than they did from 1969 to 1974, and passenger fares could have been lower as a result. Travelers could have saved over a billion dollars annually if regulated airlines had operated with characteristics of less regulated airlines.

Recommendation for Executive Action

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: CAB should continue to work toward improving airline efficiency under its existing legislation by emphasizing the methods which can be used to achieve lower costs and by increasing its reliance on competition to determine service and prices. As part of its current reexamination of the need for economic regulation of the airline industry, Congress should provide CAB with legislative guidance defining current national objectives for air transportation and the extent to which increased competition should be used to achieve those objectives. CAB and Congress should allow for reasonable transition periods to avoid undue disruption of the air transportation system.

    Agency Affected:

 

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