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Airline Deregulation, Revisited

Supreme Court Justice Stephen Breyer reflects on the benefits of competitionand its hazards

Thirty-five years ago this month, Senator Edward Kennedy (D-Mass.) held hearings on the federal government's regulation of the airlines. His primary focus was on fares. Why were they so high? Officials at the Federal Trade Commission believed that regulation itself was the primary reason. The Civil Aeronautics Board had forbidden price competition. The result was service competition instead: empty seats, steak sandwiches, Aloha bars near the galley, and sky-high prices. A business traveler may be pleased to find an empty seat for his briefcase, an FTC official said at the time, but probably doesn't realize he is paying full fare for the briefcase.

The hearings' objective was to determine if creating more competition—in fares and routes—would improve things. The answer seemed to be yes. In California and Texas, where fares were unregulated, they were much lower. The San Francisco-Los Angeles fare was about half that on the comparable, regulated Boston-Washington route. And an intra-Texas airline boasted that the farmers who used to drive across the state could fly for even less money—and it would carry any chicken coops for free.