Airline Competition: Options For Addressing Financial and Competition Problems

GAO discussed directions the National Commission to Ensure a Competitive Airline Industry might pursue to meet its goals of ensuring a financially healthy competitive airline industry. GAO noted that: (1) in some ways, the airline industry today is as concentrated as it was before deregulation; (2) airline fares continue to be lower than before deregulation, after adjusting for inflation; (3) almost all the major U.S. airlines have suffered serious losses over the last 3 years; (4) the 5 major airlines that have failed decreased their market share from 35 percent in 1987 to less than 18 percent in 1992; (5) the 3 largest airlines have increased their market share from 41 percent to almost 58 percent; (6) high debt-service costs resulting from leveraged buy-outs, ill-timed expansions, excess capacity, limited access to capital, and fare wars have contributed to the airlines' financial problems; (7) the Federal Aviation Administration's (FAA) use of budgetary resources can affect airline operating costs and profits; and (8) FAA needs to improve its performance in modernization of the air traffic control system, better allocation of staff, and investing in ways that improve airport access and operations.