ABSTRACT
Within three years of the passing of the 1978 Airline Deregulation Act nearly all US carriers were experiencing a substantial change in their financial performance. A position of high profit making was transformed rapidly into one of heavy losses. (Figure 3.1 traces the financial plight of US carriers over the past fourteen years.) At this stage few observers were willing to apportion much of the blame for this on deregulation. Indeed, it would have been unrealistic to have done so as economic recession and the protracted strike by air traffic controllers in the early 1980s were also major contributory factors. Nonetheless, the freedom for any carrier to enter any interstate city-pair market had made the larger incumbents particularly
vulnerable to the lower operating costs and greater flexibility of their new rivals. The former trunk carriers were faced with a stark choice they had either to instigate policies that rapidly would improve their relative positions vis a vis new entrants to the interstate markets or face extinction.'
