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Deregulation’s Wake

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<i> Taylor, an authority on the travel industry, lives in Los Angeles. </i>

One of the proud claims by supporters of airline deregulation is that it has caused fares to drop.

That, of course, was one of the major aims of the law when it was signed in 1978. Now, in assessing its effects, proponents point to Federal Trade Commission estimates that consumers have saved $100 billion in ticket costs as a result of increased competition.

But people who travel within California or the West Coast corridor may be among the few in the country not to get the benefits.

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The last time I flew between Los Angeles and San Francisco, for example, I paid $260 round trip. Earlier I made a trip to and from Seattle that cost $458.

Ticket Prices Rise

I had occasion to visit Seattle again shortly after that. On the way back, business required that I stop off in San Francisco for a few hours. That round trip, with the break in the return flight, cost me $610!

Ironically, the additional competition encouraged by deregulation--the very factor that is helping to keep prices down on, say, Los Angeles-New York City and Los Angeles-Chicago flights--is exactly what has prevented West Coast fliers from reaping the same rewards as the rest of the country.

Deregulation made it possible for the big and strong to get bigger and stronger. Conversely, it made life difficult for smaller carriers, even relatively healthy ones such as AirCal and PSA.

These two aggressive, independent airlines used to keep fares low in the West. But they found it tough sledding when new, powerful competition entered their markets.

Unable to expand significantly from within because of the prohibitive cost of equipment and staffing, they found themselves vulnerable to takeover. And now they, like others, are gone, indirect victims of deregulation.

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AirCal used to make its own fare decisions in the state it knew best. Now its operation has become just another part of the American Airlines family.

Once PSA built a reputation by offering the lowest fares in the West. It has been gobbled up by another giant, USAir.

Nor were those the only California-based carriers to depart the scene. Western used to compete with Delta; now they are one.

Hawaii Express tried to create a new market with lower fares from California to Honolulu. Its long-established competitors wouldn’t let it.

Likewise, Pacific Express, which tried to run intra-California service to secondary markets such as Fresno, Bakersfield and Stockton, as well as Los Angeles and San Francisco. Again, its rivals stifled Pacific’s chances of survival by matching, if not undercutting, its fares.

So, absent all of those airlines, who will put the brake on rising fares? And the fact is, airline salaries aren’t rising commensurate with the rise in fares.

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Oligopoly of Airlines

One of the major arguments of those who opposed deregulation was that, after short-term gains, it would eventually lead to an oligopoly in the airline industry--enormous amounts of market power concentrated in the hands of a very few companies. That is exactly what we are seeing now.

The shrinkage in the number of players has been permitted by the Department of Transportation’s laissez-faire attitude toward airline consolidation. To paraphrase Will Rogers: The DOT never met a merger it didn’t like.

Given responsibility by the Deregulation Act of overseeing certain aspects of the air transportation industry, in place of the disbanded Civil Aeronautics Board, the DOT has routinely approved every merger proposal, although there was some degree of opposition to each.

Even those that were disapproved by the DOT’s examining staff got the formal blessing of the department’s decision makers.

Consolidation hasn’t happened only in California, of course. Mergermania has been a national phenomenon since deregulation.

I’ll have to take the Federal Trade Commission’s word for it that the traveling public is saving billions of dollars in fare costs because of deregulation. You couldn’t prove it by me, though, or the hundreds of thousands whose travel patterns are predominantly along the West Coast.

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