ABSTRACT
Economists justified it for “natural monopolies”; industries thus classified were required to submit to regulation in return for a government-granted monopoly. Under deregulation new low-cost airlines, motor carriers, and intercity bus competitors are doing to the airlines industry what foreign competitors did to the steel and auto industries. Most economists applaud airline deregulation as a significant positive reform despite the impression that the industry seems far from equilibrium. Airline deregulation has pressured all airlines to have costs similar to those of the low-cost carriers. The effects of deregulation in the airline industry brought about direct repercussions in intercity bus transportation. In an industry thus protected, even though not completely regulated, lowering or removing tariffs produces many of the same effects that deregulation produces, through the introduction of more competition. The experience in the airline industry also indicates that it is impossible to predict precisely all the effects of injecting competition into an industry.
