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Airline travel under regulation

Airline travel under regulation

Old Jul 28, 08, 1:56 pm
  #1  
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Airline travel under regulation

I'm a bit young to have done much airline travel before 1978, but I'm very interested in how the system worked. I understand that the government set prices by city/pair, and the airlines competed on service. Does that mean that for a heavily served route, such as Washington-Los Angeles, there was no point in calling different airlines as they would all quote the same price? I understand that the regulations even defined specifically which meals could be served on which flights? What was the purpose of that?

Was the city pair price static - meaning was it the same if I walked up to the ticket counter as opposed to buying weeks in advance?

I know there wasn't as much of a hub and spoke system then as there is now, but there must have been connections - how would connections work? Again the same price?

Was the price constant for all flights the same day, meaning a morning transcon was the same price as a red-eye? Didn't this result in abysmal load factors for the undesirable times?

How would prices be set for new city pairs when an airline expanded to that market? What was the government's involvement?

How did Southwest compete as a low cost carrier if they couldn't undercut other airline's fares? Only by flying underserved city pairs?

If anybody has any good references on reading about how the airline industry worked under regulation, I'd love to find them. I'm studying how firms and customers adjust to regulation/deregulation, and I'm interested in learning from the airline model.

Thanks!
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Old Jul 28, 08, 2:00 pm
  #2  
 
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Originally Posted by clanum View Post
How did Southwest compete as a low cost carrier if they couldn't undercut other airline's fares? Only by flying underserved city pairs?
I could be wrong, but I think WN was able to succeed due to the fact that the government regulated interstate fares but not intrastate fares. Hence WN was able to charge ultra-low fares for travel within TX. Again, that is just a SWAG.
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Old Jul 28, 08, 4:07 pm
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I believe that you are reading into the term "Regulation" reams of supposition which are entirely untrue. The government didn't "set" prices, although constraints on "head to head" competition tended to hold them at high levels inb many markets. The airlines themselves had in almost all cases risen from "regional" carriers, and the syatem was designed to protect and preserve that concept.

One must assume that the "corporate raiders" (names omitted) who came along did so with an eye for quick profit or cash-extraction from operations which in almost every aspect except "glamor" had been badly managed.

The rise of "hub and spoke" operations - on paper at least potentially vastly more economical than point to point ops - was the product of the "Bean Counter" mentality introduced in the graduate business schools of the 60s, the basic theory that all situations could be improved by careful analysis, and theoretical approaches like "Capacity Control" replaced the "WAG" and "Pure Promotion" schemes, "WAG", "Wild A__ Guess" was the product of the airlines'founders and ealy managers, all avaiators, and blinded or blindered therefrom. Pure Promotion arose in the late 40s/early 50s from the new world opened by men like Doyle Dane Bernbach for whom "packaging the product" might mean far more than the product itself.

There were fewer fare classes/ticketing schemes and the variations in ticket pricing were within narrower parameters, but faced by newer, faster, higher capacity a/c and more and more people economically able to travel by air, "deregulation" as we've known it was inevitable (and not even political). Some of those most victimized by it were among its early loud advocates.

For decades, with all the unwisdom of GM and Ford, the airlines had built in labor cost factor escalation, uneconomical operational methodology, and a tiered "caste" system unable to comprehend that the "masses" would be at the door wanting to fly, but unwilling to pay the articialized tariffs built into the system by its private operatorrs (and protected in many cases by the Congress members who were coddled by the carriers, often grand "free riders".

WN started out shuttling business men between HOU and DAL, a few minutes closer to Downtown Dallas than DFW would be, and with fares tiered to predicted load factors. Herb's theory was not very complex, to simply fly the a/c regularly enough to make them productive, accepting at off-peak hours low fares as better than no fares. I suspect that even with today's razor thin profit margins or worse, dramatic losses, WN's edge is that its a/c spend more time aloft with paying customers in the seats.
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Old Jul 29, 08, 3:44 am
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Cool post, TMOliver! ^
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