Outlook for the ‘90s : ...
The 1978 deregulation of U.S. airlines took hold during the 1980s, having an impact at least equal to the introduction of the jet plane during the 1950s and changing the shape of the industry forever.
No longer were airlines shielded by the government with franchised routes and fares. Any carrier could fly anywhere--and charge as much as the traffic would bear. A myriad of new carriers started up on shoestrings.
The second half of the decade was the consolidation period.
The industry’s new entries (remember People Express?), unable to win the wars against the entrenched competition despite their usually lower fares were swallowed up by the major carriers or simply went bankrupt. But some familiar names--Western, Republic, Ozark, Pacific Southwest--also disappeared.
The major carriers responded to the new competition by lowering their own fares. But while freezing out their new competitors, they were also forced to cut costs.
Generally, their levels of service slipped, and they introduced “two-tier” wage structures under which new pilots, mechanics and flight attendants were paid much less than veteran workers.
Other major changes included introduction by the airlines of hub-and-spoke systems and frequent-flier programs.
A hub-and-spoke system vastly increased connection opportunities for an airline’s passengers, giving it a better chance to hold onto a customer for an entire trip. The frequent-flier programs, with awards of free flights, class upgrades and other premiums, were a promotional scheme that rewarded loyal customers.
Things to expect during the 1990s, experts say, are airline globalization, involving much closer business and ownership ties between airlines of different countries, controversies over safety and aging aircraft, some further consolidation, the stabilization of fares and a growing trend toward labor peace.
“Basically,” said airline analyst Hans J. Plickert of the Transportation Group, “we should see a reasonably stable, consistently profitable airline industry in the 1990s.”
