Airline Deregulation Fables

Prior to the Carter administration, the Civil Aeronautics Board basically set airfares throughout the country. This sharply diminished price competition and induced airlines to compete on the basis of offering high-quality service. Then came deregulation, and both prices and quality fell sharply. It turns out that what tourists really want is to get where they’re going, and what firms want is to pay less money to send their workers around the world. Glen Whitman cites the decline of the young attractive flight attendant as an example of this dynamic in action, but I think Megan McArdle is right to say that anti-discrimination laws and union protections are the bigger story here.

One way to look at this kind of issue is just to look at long-haul first class service. Even though it turns out that most travelers prefer cheaper flights to better flights, that’s not a universal preference and airlines do offer the option of paying more money for better service. People flying first class generally get much nicer seats, better food, shorter lines, and more attention from flight attendants, but they’re subject to the same labor market regulations, contract provisions, and norms as everyone else.