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Airline Deregulation: The American Experience and Prospects for Europe

  • Jan K. Brueckner
  • Anton Goebel
  • Esko Niskanen

This paper provides an exhaustive discussion of the impact of airline deregulation in the U.S., followed by a discussion of the likely effects of deregulation in the EU. The paper argues that the benefits of U.S. deregulation, as manifested in lower fares, were generated in part by the reorganization of route structures into hub-and-spoke networks. The same reorganization is identified as a means for improving airline efficiency in the EU, which is currently far below that of U.S. carriers. Such an efficiency improvement is necessary if EU deregulation is to lead to lower fares, as in the U.S. However, the paper identifies convenient rail service, which reduces the willingness of passengers to undertake circuitous airline trips, as one impediment to the formation of hub-and-spoke networks. Another impediment is airport congestion, which is more serious in the EU than in the U.S.

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Paper provided by Government Institute for Economic Research Finland (VATT) in its series Discussion Papers with number 149.

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Date of creation: 01 Jan 1997
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Handle: RePEc:fer:dpaper:149
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  1. Neven, Damien J. & Roller, Lars-Hendrik, 1996. "Rent sharing in the European airline industry," European Economic Review, Elsevier, vol. 40(3-5), pages 933-940, April.
  2. Steven Berry & Michael Carnall & Pablo T. Spiller, 1996. "Airline Hubs: Costs, Markups and the Implications of Customer Heterogeneity," NBER Working Papers 5561, National Bureau of Economic Research, Inc.
  3. Brueckner, Jan K & Spiller, Pablo T, 1994. "Economies of Traffic Density in the Deregulated Airline Industry," Journal of Law and Economics, University of Chicago Press, vol. 37(2), pages 379-415, October.
  4. Brueckner, Jan K. & Spiller, Pablo T., 1991. "Competition and mergers in airline networks," International Journal of Industrial Organization, Elsevier, vol. 9(3), pages 323-342, September.
  5. Borenstein, S., 1991. "The Evolution of U.S. Airline Competition," Papers 389, California Davis - Institute of Governmental Affairs.
  6. Good, David H & Roller, Lars-Hendrik & Sickles, Robin C, 1993. "U.S. Airline Deregulation: Implications for European Transport," Economic Journal, Royal Economic Society, vol. 103(419), pages 1028-41, July.
  7. Jan K. Brueckner & Nichola J. Dyer & Pablo T. Spiller, 1992. "Fare Determination in Airline Hub-and-Spoke Networks," RAND Journal of Economics, The RAND Corporation, vol. 23(3), pages 309-333, Autumn.
  8. Clifford Winston, 1991. "Efficient Transportation Infrastructure Policy," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 113-127, Winter.
  9. Severin Borenstein, 1989. "Hubs and High Fares: Dominance and Market Power in the U.S. Airline Industry," RAND Journal of Economics, The RAND Corporation, vol. 20(3), pages 344-365, Autumn.
  10. Daniel, Joseph I, 1995. "Congestion Pricing and Capacity of Large Hub Airports: A Bottleneck Model with Stochastic Queues," Econometrica, Econometric Society, vol. 63(2), pages 327-70, March.
  11. Borenstein, Severin & Rose, Nancy L, 1994. "Competition and Price Dispersion in the U.S. Airline Industry," Journal of Political Economy, University of Chicago Press, vol. 102(4), pages 653-83, August.
  12. Manfred J. Holler & G√ľnter Knieps & Esko Niskanen, 1997. "Standardization in Transportation Markets: A European Perspective," Discussion Papers 151, Government Institute for Economic Research Finland (VATT).
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