Attention All Passengers by William J. McGee Page B

of deregulation.
    Here are Kahn’s own words, in testimony before Congress in 2000: “There are, I think, two things to be said about the fact that [a deregulated airline industry] has also been accompanied by a marked increase in discomfort and congestion. First, that it was precisely the failure of regulation to offer travelers a low-cost/lower-quality product that was its greatest failure. And second, that this deterioration in the quality of the air travel experience is a consequence, in important measure, of the failure of government to provide the optimal infrastructure—specifically, air traffic control and airport capacity—and to price it correctly.”
    The arguments persist on whether some form of regulation should be reimposed on the airlines. But one thing is certain: there is no going back entirely to 1978.
    Brave New World of Competition
    In August 1978, as that debate was raging in Congress, Time published a cover story—“New Era in the Air: Cheap Fares, Crowded Flights”—depicting a sardine can with wings. How crowded? Passenger load factors for U.S. carriers reached 61.5 percent systemwide that year. Consider that four empty seats out of every ten was considered “crowded” thirty-four years ago; in 2010 the domestic industry average had reached 82.1 percent.
    Time opined: “Never has the future been less certain. The U.S. airline industry has been treated like a semi-monopolistic public utility, with routes and fares controlled by the Civil Aeronautics Board, which has sought to avoid over-competition and ruinous price wars. Now, President Carter seeks to free the airlines from Government economic controls entirely and allow them to fly anywhere at any time and charge any price, no matter how ridiculously low.” The article itself is a bit of a time capsule, with its references to “stewardesses,” call center wait times of “up to ten minutes,” and hot versus cold in-flight meals. Virtually no one accurately predicted the explosive passenger demand of the deregulated industry, with Time stating: “In the future, passenger growth will be somewhere between 6 percent, which is the historic average, and 10 percent.” In fact, in 1978 the U.S. airline industry carried 275 million passengers; that number would increase to 720 million by 2010, a rise of 162 percent.
    What’s particularly striking about the birth of airline deregulation was how it was midwived by the left, not the right as many assume today. Democrats controlled the White House and both houses of Congress in 1978, and the strongest proponents for unleashing free-market forces were President Carter and Senator Kennedy. And among those who testified on its behalf was Ralph Nader. Thirty-three years later, I asked Nader if he has any regrets, and he said, “In terms of competition, we supported it.” But he stressed there were two underlying assumptions: the first was the implementation of stringent safety oversight, and the second was the implementation of stringent antitrust laws. Unfortunately, Nader maintained, both promises have been broken.
    I visited my fellow FAAC member the economist Severin Borenstein, who began working for Kahn at an early age. We sat in Borenstein’s office at the University of California at Berkeley, and he reminisced about the man who arguably had the greatest impact on the U.S. airline industry since the Wright brothers. Knowing that he remained in touch with his mentor Kahn until his death, I pressed him on what the architect of airline deregulation really thought of the end product more than thirty years later. “Fred said it didn’t work out the way he thought it would,” Borenstein acknowledged. What could not be foreseen was how legacy airlines would use tools such as frequent flyer programs, travel agency override bonus commissions, and dominance of hub airports to thwart competition: “Deregulation did not