Deregulation Of The Airline Industry

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about in 1978 introduced a
situation in which the national and regional carriers were suddenly able to
compete in an environment that resembled a free market. Rate schedules were
lifted, price fixing was eliminated and route management was removed. The main
factors that affected whether an airline could serve a particular city was
whether or not that city had enough gates for the new carrier, and whether the
carrier was able to afford to purchase them. Companies such as Southwest
recognized potential for low fares, and began building a niche for themselves by
offering low fares with equivalent low levels of service. Southwest's success
gave rise to a new generation of low fare airlines, with ValuJet entering the
market in the early 1990's. Unfortunately, ValuJet suffered a string of
accidents which brought the future of this air carrier into question.
ValuJet is a low-priced airline that offers inexpensive tickets for
regional travel. Based in Atlanta, the ...

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p.30).
In May 1996, Valujet flight 592 crashed in the Everglades, killing all
aboard and resulting in a shutdown of the carrier for several months. When
ValuJet began flying again, it did so with a reduced schedule, and considerable
speculation about whether the company will be able to continue operations long-
term. The company is also involved in litigation resulting from the crash, and
the long-term prospects for the company are questionable.
The following chart identifies key operating statistics for Southwest
(seat miles are in millions, cost factors are in cents)

(Shammas, 1996, p. 5541P):
1995 1994 1993

...

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