Yglesias is Wrong on Airlines

Deregulation has failed air travelers.

By William J. McGee, Senior Fellow for Aviation and Travel

The abundance movement and the anti-monopoly movement should be complementary. Both seek to address the policies and tackle the forces that have made life economically harder for Americans. The intent of both is to restore an America where we can get things done, invest for the future, and take care of our most fundamental needs.

Yet the abundance movement has seemingly gone out of its way to antagonize the anti-monopoly movement, claiming it is obsessed with corporate power to the detriment of business growth. But, in fact, they are the ones that possess a less than perfect grasp of how economic power works. They are the ones in denial about how large business interests – not just good government types - have used government regulation to solidify their market dominance, increasing their profits at the expense of American wallets and quality of life.

A recent post by Matthew Yglesias, "An Abundance Agenda for Antitrust Policy," where he cites airline deregulation as a success, inadvertently demonstrates all of this. Yglesias believes flying has become cheaper and more accessible as a result of deregulation, and criticized former FTC chair Lina Khan for not recognizing what he perceives are the obvious benefits of airline deregulation.

In fact, Yglesias is making a classic mistake and confusing cause and effect. Deregulation occurred as technological progress was already bringing down the cost of airline tickets and democratizing flying.

Let's dig in and address Yglesias's key falsehoods.

"Airline deregulation was a straightforwardly pro-competition measure."

Indeed, the 1978 Airline Deregulation Act contains language specifying it was “placing maximum reliance on competition” and avoiding “unreasonable industry consolidation.” On those grounds alone, deregulation should be judged a failure.

The domestic airline industry is more consolidated than at any time since the 1910s. We have just 11 scheduled passenger carriers (versus 75 in the 1980s) and the Big Four oligopoly of American, Delta, Southwest, and United now control an unprecedented 80 percent of the market. And after seeing dozens of new airlines in the 1980s, we’ve had only two new entrant airlines – Avelo and Breeze – since 2007, the longest gap without any start-ups in history.

As AELP noted when proposing model legislation that would eliminate large investors from engaging in "common ownership" of stock in multiple airlines, this freeze in low fare competition means millions of Americans are paying higher airfares. Moreover, low fare airlines such as Avelo and Breeze often provide service from cities not served by the majors.

"But in the more competitive landscape, people fly much more than they used to because air travel has become cheaper and more abundant."

Here Yglesias recycles industry talking points repeated so often they're accepted as truth. Proponents of airline deregulation maintain a sacred trinity of assertions: that deregulation allowed more people to fly, and that it lowered fares and made flying safer.

But all three of these trends were already occurring when deregulation occurred. In fact, deregulation capitalized on trendlines on all three of these things that actually accelerated faster PRIOR TO 1978 than they did after.

Flying. There certainly was an air travel boom, but it was driven by technology, not deregulation. The successful launch of jet aircraft in 1958 created a travel boom, and in 1970 widebody jets—which lowered costs by carrying more passengers greater distances—created a second boom.

According to Airlines for America (which spent $5.7 million last year lobbying for the largest carriers) only 49% of Americans had ever flown in 1971. But that increased 16 percentage points to 65% by 1979, when deregulation took effect. Eight years later in 1987 it increased 7 percentage points to 72%, and continued steadily climbing until peaking at 90% in 2021 (and slightly declining since then). That jump between 1971 and 1979 hasn't been matched in any eight-year period during 47 years of deregulation.

Moreover, Airlines for America’s data on numbers of passengers boarded also show tremendous growth occurring 30 years BEFORE deregulation:

1950: 19,220,000

1960: 62,257,000

1970: 169,922,000

1980: 296,901,000

1990: 465,558,000

2000: 666,149,000

2010: 720,496,000

2024: 982,710,000

True, more passengers certainly started flying after 1978, but that trendline actually declined when compared to 1950-1978. The myth that commercial flying was exclusively the domain of the rich until October 1978 has been disproven time and time again, yet it persists.

Fares. Yglesias claims that deregulation lowered "average" fares. This is yet another myth, and involves overlooking several less-than-convenient facts.

Fares were falling BEFORE deregulation as more passengers started flying. This has been long known. An analysis by Melvin A. Brenner published in 1988 in the Transportation Law Journal found prices started dropping in 1962 and continued through 1985 (except, intriguingly, the two years immediately AFTER deregulation.) Another survey, this once released by the Economic Policy Institute in 1990, found airfares fell more in the decade before 1978 than in the decade after, concluding "real fares rose some 50% after deregulation."

At the same time, straightforward price comparisons can be misleading. They do not factor in the fact that people are paying for a lesser good, because of such things as shrinking seats, eliminated meals and less overall service from the airline. At the same time, since the launch of junk fees for baggage in 2007, no true apples-to-apples comparisons address how base fares no longer include a range of fees billed separately for baggage, seat selection, early boarding, inflight amenities, etc. In addition, economy class seat sizes began shrinking in the early 2000s as well.

A 2007 study by David B. Richards concluded "there are limited, if any, demonstrable domestic system passenger fare savings" as a result of deregulation. And in 2000 Monthly Labor Review published data on airline fares per mile, clearly showing earlier and steeper fare cuts in the 1960s than after deregulation. Their source? Airlines for America.

Finally, Airfares haven't fallen for many routes and regions nationwide. It's hard to argue airline abundance in the wake of contraction, regional inequality, and the loss of dozens of major hubs in cities as large as Cincinnati, Cleveland, Pittsburgh, and St. Louis.

So what drove fares downward if it wasn’t deregulation? In a word, technology. Advances increased the reliability of jet aircraft even as they lowered costs. Widebody twin-aisle jets were more cost efficient than smaller narrowbodies. Fuel and maintenance expenses fell when twin-engine aircraft replaced three and four engines. Labor expenses decreased as technological advances replaced three-person cockpits and two person cockpits became standard. Advances in jet engines allowed longer range flights, remaking airline route maps so that longer nonstop flights could eliminated multiple fuel stops enroute.

Safety. The signing of the Federal Aviation Act in 1958 was a watershed for airline safety and air traffic control, and a detailed Boeing study found total accidents and fatalities started plummeting dramatically in 1960, 18 years before deregulation.

Department of Transportation statistics show this as well:

1960: 90 accidents, 499 fatalities

1970: 55 accidents, 146 fatalities

1980: 19 accidents, 1 fatality

In fact, when the Civil Aeronautics Board set fares (1938-1978), there were no incentives for airlines to cut corners on safety. However, deregulation changed that equation. The domestic airlines have outsource aircraft maintenance to locations like El Salvador and China, which pay technicians who cannot legally be called mechanics pennies on the dollar, effectively creating a lower set of standards on licensing, security background checks, and drug and alcohol screening for offshored work on U.S. airplanes. All this while lobbying Congress to lower pilot hiring and training standards.

“Most airlines have relatively strong labor unions..."

We wish! Alas, Yglesias is wrong here too. After 1978, the stability of airline work was shattered due to mass layoffs of tens of thousands of workers and lower "B-scale" wages for new hires in nearly all departments, including ground staff and in some cases flight attendants, and pilots. Meanwhile, everything from maintenance to call centers were outsourced and offshored.

Recently I spoke in Charlotte, the nation's most monopolized hub airport where American Airlines controls 88% of all flights. Hundreds of essential workers servicing airplanes on the ramp and customers in the terminal there are being paid less than living wages. High turnover affects tarmac safety (with a worker death in January) and consumer safety. Wheelchair attendants, for instance, often need to push two passengers at once, hardly a safe or ideal situation.

“The losers in this process have been primarily people working in the airline industry."

Wrong again. The losers include passengers, corporations, and entire cities— and even regions—nationwide. Record mergers spurred hub closures, fewer nonstop flights, and higher fares for millions of Americans. As a former airline employee, I would assert it's elitist, disturbing and flat out morally wrong to imply it's somehow acceptable to decimate a workforce keeping travelers safe 24/7.

America has a weaker airline industry than it did prior to 1978, and the long trail of bankruptcies, mergers, and bailouts makes this clear. The twin problems of deregulation and consolidation have resulted in monopolization, fewer flights, higher fares, and worse service. Matt Yglesias is wrong in touting the airlines as a poster child for abundance. Only a robust anti-monopoly agenda can truly achieve that.