History of US Airline Deregulation
Part 5 : 1979 - 2010 : More
Benefits of Deregulation - Jobs, Safety and Airplane
The main driving force
for new fuel efficient planes such as the 787 has been the
airlines, who push Boeing and Airbus to develop new planes
to give competitive and cost advantages. We in turn
Part of a series on US airline
regulation and deregulation
- see extra articles listed in the right hand column.
Contrary to the fears expressed
by many well intentioned industry 'experts', deregulation did
not result in any of the problems they projected. As we
detail in the previous
part of this series, deregulation brought about a
massive growth in air travel combined with huge reductions in
the cost to do so.
And that's not all. A
booming airline industry brought many more benefits to the
country as a whole. And - almost last, but definitely not
least, please do read down to see the amazing statistic about
changes to the safety of flying.
Result 4 : Hundreds of
Thousands of New Jobs
So there the airlines were,
scrambling to add new routes, to add new flights, and to respond to the millions of extra Americans flying their
services. What did this require the airlines to do?
Yes - add more jobs.
In the decade from 1979
to 1989, airline employment increased from 356,000 people to
556,000 people. Almost exactly 200,000 more people
were directly employed by the airlines.
Now think about all the
other people who also gained employment indirectly as a result
of this boom in aviation. Airport workers. Airplane
builders. Taxi drivers. Rental car company
employees. Hotel workers. Security screeners. And so on, as far as you
care to go.
Don't forget also the next
level of jobs. All these direct new jobs and new incomes resulted
in money being spent in local stores, and so more retail
employment, more service industry employment and so on and so
on, rippling all the way through the entire US economy.
Travel and tourism has always been a labor intensive industry.
In sorry contrast, as I write this, the US
government has spent some uncertain amount of money way in
excess of $1 trillion in 'stimulus funding' and 'bailouts' and
is threatening to spend who knows how many more hundreds of
billions of dollars in a further attempt to try and bolster what
by just about every measure possible has been a failure and
waste of money of the first huge amount of money.
The thought of truly
creating 200,000 real jobs, let alone however many in total the
growth in aviation during the decade of the 1980s actually
caused, rather than spending huge amounts of money to create a
pitifully small number of temporary jobs that may well disappear
as soon as the artificial government funding disappears, seems
to be a total impossibility today.
Perhaps we need to
persuade the government to deregulate another industry, and
to allow the enjoy a surge of new employment in another field, at no cost to
the government and us, its tax payers. Noting that the
only industry sector to clearly grow its job numbers is the
government, dare I opine that perhaps this is all backwards?
More employment could be created by less government, rather than
by more government.
To fully consider the
topic of airline employment, it is true that the last years have
seen airline employment numbers drop - for example, from January 2006 to
January 2010 the industry lost 26,200 jobs. This is due to
the airlines tightening up on work practices, and also due to
the tougher economic times and reductions in people flying.
But more efficient work
practices and greater productivity per employee are not unique
to the airlines alone, and the fact remains that whatever the
employment numbers are or would be, deregulation
has created such a surge in airline travel that whatever
the employment level is in the airline industry, it is much more
now due to three times more people traveling.
Reason 5 : The Airlines
are Vastly Safer
One of the strongest held
views of supporters of regulation is that the airlines can't be
trusted to enforce their own safety, and that the commercial and
competitive pressures of deregulation would force the airlines
to cut back on the costs of safety programs.
Not only that. Even
today you will regularly read commentary from people stating as
certain fact that the airlines are less safe now than they used
Both claims have been shown
to be laughably ridiculous. Let's look at a very simple
The fatal accident rate,
per departure, is 13 times lower in 2009 than in 1969.
There were 1.302 accidents per 100,000 departures in 1969; in
2009, there were 0.098 accidents per 100,000 departures - that
is not quite one per million flights.
This is an even more
impressive statistic when you consider that each departure these
days has more people on a plane that flies more miles than was
the case in 1969.
The airlines are safety
obsessed, not so much because they are 'good guys' but because
the commercial consequences to them if they were seen to be
operating an unsafe airline are unthinkably severe. In
curious contradictory fact, they would be largely shielded from
these same commercial consequences in a regulated/protected
Deregulation has encouraged
the airlines to become more safety conscious rather than less.
Reason 6 : The Airlines
Are Driving the Development of Better Planes
With the extraordinary collapse of the
world-wide airplane building industry, resulting in only two major companies
remaining, the competitive pressures encouraging change and
innovation within the aerospace industry have dropped down to
close to zero.
Boeing and Airbus exist in a
cozy duopoly, and as long as one company doesn't go off
developing a fancy new plane, the other company feels no great
pressure to do so either. This was seen in the long
and greatly overdue process over the development of a 747 successor, with Boeing
doing all it could to discourage Airbus from developing a
successor plane, and then eventually and half-heartedly coming
up with a semi-successor itself (the 747-8 which already - prior
to its first operational airline flight, already has the
distinct appearance of being a massive commercial failure).
This can also be seen in the
decision by Boeing to abandon its work developing the 2707
supersonic plane, and the general lack of interest by both
manufacturers in supersonic design.
But nowhere has it been more
obviously apparent than in the 737 and A320 series planes.
The 737 fuselage design dates back to the 1950s, and the first
737 flew in 1967. The A320 is newer, but is still 22 years
old (first flight in 1988). These two archaic plane series
are the oldest planes still made by both companies.
they are also their best selling planes - surely you'd expect
both Airbus and Boeing would be feverishly putting all their R&D
into a pitched battle for leadership in this biggest selling
most popular part of the commercial jetliner marketplace?
Instead, we see a stately
and sedate process marked by very little innovation or
development by other company, with both companies desperately
hoping the other company won't do anything to upset the current
'status quo' and force them both into a costly process of
developing replacements to the the 737/A320 series of planes,
and with the attendant risk that either company might lose
market share when the new competing planes end up being
available to the airlines.
The only thing forcing Airbus and Boeing to come up with new airplane designs
these days is the demand from the airlines to do so (and the
uncontrolled competitive threats posed by the
possible rise of new airplane builders from China/Japan in the
East, and the ressurection of airplane buildings from Russia in
The driving imperative need
by airlines to get more efficiencies out of their operations has
been directly responsible for their pressure on the airplane
manufacturers (and engine manufacturers too) and the subsequent
development of more fuel efficient and economic airplanes.
If the airlines were still
in a protected regulated environment, it would not be so
important to them to keep their costs as low as possible.
But in the competitive world they struggle to survive in, they
need to keep fares affordable and costs low, so they are
accelerating technological change in a way they didn't do and
wouldn't do in a regulated environment.
Between 1971 and 1998 the
fleet-average annual improvement in fuel economy per available
seat-mile was estimated at 2.4%. This might sound like
very little, but it means the 1998 plane is giving almost twice
the fuel economy of the 1971 plane (1.9 times more).
The most fuel efficient
planes these days give over 80 mpg/passenger - a surprisingly
impressive statistic that makes you wonder why the
environmentalists are so anti-air travel.
Planes fly further than ever
before, making it quicker, easier, and more economical to fly
long journeys. With the notable exception
of the hideously inefficient (and very unsuccessful) 747SP, no
planes in 1978 flew more than about 6800 miles.
there are plenty of planes capable of well in excess of 8000
miles, climaxing in the astonishing 10,800 mile range - fully
loaded - of the 777-200LR, and the only slightly shorter 10,200
mile range of the A340-500.
So, it seems from the
preceding analysis that everything has been good and great
subsequent to airline deregulation.
But, wait! There
are still two remaining parts to this article series.
Firstly, it is not well
appreciated that much of the airline industry remains regulated
in some form or another. Deregulation is a partial and
incomplete process. The next two parts of our series looks at the
remaining areas of regulatory interference.
Second, some people -
believe it or not - are advocating that we should reregulate
those parts of the airline industry that were previously
deregulated. How and why can they think this to be a good
idea? What could we expect from a reregulation of the
industry? The last part of our series (coming soon) will
look at this.
Part of a series on US airline
regulation, deregulation, and whether or not there should be
reregulation introduced again now
- please see extra articles listed at the top in
the right hand column
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13 Aug 2010, last update
28 May 2011
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