Fares Up Since Deregulation, New Study Finds : Airlines: A think tank argues that without deregulation fares would have been lower. It says competition would have remained stronger.

A new study contends that airline ticket prices are 2.6% higher today than they would have been without the 1978 Airline Deregulation Act, disputing recent Administration findings that deregulation has saved travelers money.

In its report, the Economic Policy Institute, a Washington-based think tank, said that although prices overall have gone down since deregulation, much of the credit goes to a reduction in fuel costs. It argued that without deregulation fares would have been even lower because competition would have remained stronger.

The EPI report calls on Congress “to reconsider the experiment of airline deregulation” by restoring some government supervision of the industry. For example, it proposed that ticket prices be regulated so that they reflect costs, not market forces between cities.

Paul S. Dempsey, a University of Denver transportation law professor and author of the study, “Flying Blind: The Failure of Airline Deregulation,” said at a news conference Wednesday that he employed “more rigorous” research than did the Department of Transportation for a study with opposite conclusions that was released last month.

Department officials declined to comment, saying they had not reviewed the EPI study.

Last month, the Administration released a report that found that air travelers now fly to more cities and at lower fares than they did under government regulation. In releasing the results of the nine-month study, Transportation Secretary Samuel K. Skinner said it was the “most comprehensive airline competition study conducted by the government since deregulation.”

While conceding that “pockets of problems” existed under deregulation, Skinner declared it a success and vowed to fight any effort to restore government control. “Deregulation has worked,” he said.

However, the EPI study contends that the government report was flawed because it failed to consider the declining cost of fuel after 1978.

Dempsey, who supported deregulation as an attorney for the Civil Aeronautics Board, said airline ticket prices were on a downward trend before deregulation and would have continued to go down even more.

The study noted that between 1967 and 1978, ticket prices dropped an average of about 30% even though fuel prices rose about 50%. In contrast, fuel prices fell about 25% in the decade after deregulation, while ticket prices fell 28%.

The EPI study also blamed deregulation for the growth of hub-and-spoke service, in which airlines center their operations at one or more airports and dominate service there. The resulting lack of competition has produced poorer service, narrower margins of safety, fewer nonstop trips and less service to small towns, the report argued.

“Flying has become a rather unpleasant experience,” the report concluded. “The planes are filthy, delayed, canceled and overbooked, our luggage disappears, and the food is processed cardboard. Chronic delays, missed connections, near-misses and circuitous routing all are products of hub-and-spoking, adopted by nearly every major airline.”

The report proposed the establishment of an independent Federal Transportation Commission, which would regulate all transportation in the nation. Such a commission, patterned after the Federal Trade Commission and the Securities and Exchange Commission, would not be controlled by any transportation mode, as was the old Civil Aeronautics Board, Dempsey said.

In addition, the report called for a prohibition of airlines holding a dominant presence at more than one airport, effectively breaking up the multiple hub operations of several of the nation’s largest air carriers. “Hub concentration translates into escalating fares,” the report said.

EPI is a nonprofit economic think tank supported by foundations, labor unions, corporations and individuals.