Flying in the US Sucks. Here's Why.
Neoliberal deregulation of a natural monopoly has destroyed a public good.
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Ganesh Sitaraman, in This Is Why Flying Is So Awful1, summarizes some of the reasons why flying is so bad for us as travelers, and for the industry as a public good.
Wait, you may say: a public good? Yes, the airline industry is a public good, but one that is not treated as one. I will explore that in this post, but first let me quote Sitaraman:
Almost everywhere you look, there’s airline trouble. A tragic crash at LaGuardia Airport. Long lines at airport security. Thousands of cancellations because of bad weather in Dallas and Atlanta. Higher prices. More proposed airline mergers. And a spate of near misses in the sky.
You could blame human error or partisan fights in Washington for some of these issues, but there is a deeper story behind the turbulence: Nearly half a century ago, the U.S. government abandoned its position that regulation and investment were critical elements for America’s transportation infrastructure.
If you remember the days of ample leg room, metal silverware and complimentary drinks, you know flying hasn’t always been like this. That’s largely because of deregulation. After the Wall Street crash of 1929 nearly caused the airline industry to collapse, the government stepped in with a comprehensive regulatory system.
The Civil Aeronautics Board (CAB) was created in 1938 (as the Civil Aeronautics Authority, and renamed in 1940), and treated the airline industry as a natural monopoly, managing nearly all aspects of the industry, including what routes airlines could fly, how much they could charge, and whether airlines could merge or not. The goal was not profits for the companies flying, but for the public good. In particular, the CAB wanted to ensure that air travel to small and medium-sized cities was available at affordable prices. In other words, to treat it like the national highway system.
Sitaraman’s 25 March piece is only the most recent he’s written — or been interviewed — on this topic. I think that Jeff Neal’s interview with him in 2024 — Airline deregulation may be why flying is such a miserable part of holiday travel2 — is perhaps the best.
First off, though, the title should read Airline deregulation is why flying sucks. US air travel sucks because of mistakes made in different eras’ policy regimes.
The first era (starting with the Wright Brothers), airlines were supported by air mail subsidies.
Then, the second era. Sitaraman: ‘in the 1930s, you get what I would call the first modern era of airline policy. It was a period of regulated competition in which Congress created a Civil Aeronautics Board, or CAB. The CAB allocated routes to different airlines to fly between different cities and it regulated the prices of those flights as well.’ ‘And over 40 years, from 1938 to 1978, this system worked pretty well. We had an increasing number of people flying. We had improvements in safety. We had the shift to the jet age. And prices were declining over this period.3 It was a reliable system.’ That lasted until 1978, when neoliberals [Alfred Kahn, head of the CAB, Jimmy Carter, and Ted Kennedy] deregulated airlines.
‘The airlines moved into another phase, which I think about as a kind of Hunger Games. The 1980s were defined by cutthroat competition between the airlines. A lot of new entrants offered no frills service, had no unions4, and took on the high-volume traffic and high traffic routes, for example. This initially meant more competition and lower prices on those routes. But the big airlines fought back and pushed out a lot of these new competitors, raised prices afterwards, and consolidated into large fortress hubs like Atlanta, Dallas, or Charlotte. By the end of the decade, after dozens of bankruptcies and mergers, labor-management strife, declining service quality, congestion, and lost baggage, there was a shakeout in the airlines that led to reconsolidation. The same big airlines that existed under regulation were still dominant, just without the checks of the regulated period. So, we moved from regulated oligopoly to unregulated oligopoly.’ ‘Now what we have is ‘more like monopoly capitalism, a system in which there is very little competition and few choices.’
The core decision: ‘One of the divides between the regulators of the 1930s and the deregulators of the 1970s was whether airlines are ordinary businesses or more like public utilities. The regulators saw airlines as public utilities. They have high capital costs. There are economies of scale and network effects. Because of these core economic dimensions, plus their role as an essential service for the public, those businesses need to be regulated differently than, say, manufacturers of sofas or coffee mugs.’
Sitaraman rejects two approaches: A single nationalized airline, and a public option, with a private and a public airline, competing.
His final recommendation is to return to regulated competition. ‘three principles for reforming air travel. The first is no flyover country. I think we shouldn’t have an airline system that doesn’t serve large parts of the country, including smaller and midsize cities. The second principle is no bailouts, no bankruptcies. We want a stable airline business, one that isn’t sometimes going through boom years, and other times needing taxpayer bailouts. We want airlines to be reliable all the time. And then third is fair and transparent prices. Over the last few decades, we’ve seen pricing get more and more complicated with increasing numbers of fares and classes of fares, in addition to all the junk fees and additional prices and costs that are added to tickets now. I think passengers need a much simpler system that’s easier for people to understand, easier for people to navigate, and fair for them in the process.’
Yes please.
The magisterial analysis of the airline mess we have wiggled ourselves into was authored by others. Although it’s from 2012, Terminal Sickness — by Philip Longman and Lina Khan (who became head of the US Federal Trade Commission (FTC) from 2021 to 2025), is a long read, but worth it.
A few excerpts:
‘Until 1978, the United States viewed airline service as a “public convenience and necessity,” and used a government agency—the Civil Aeronautics Board, or CAB—to assign routes and set fares. This regulation was designed to ensure that citizens in cities like Cincinnati[1] received service roughly equal, in quality and price, to that provided to other comparably sized communities like Charlotte. The government also made sure that smaller cities maintained vital links to the national air network.’
‘In 1978, however, a group of liberals including Ralph Nader, Ted Kennedy, Kennedy’s then Senate aide Stephen Breyer, and an economist named Alfred Kahn, whom President Jimmy Carter chose to run the CAB, conjured up a plan to drive down the cost of airline fares by fostering more price competition among airlines. Though they called it “deregulation,” the practical effect of eliminating the CAB, especially after subsequent administrations abandoned antitrust enforcement as well, was to shift control of the airline industry from experts answerable to the public to corporate boardrooms and Wall Street.’
‘But even strong antitrust enforcement wouldn’t have helped that much, because airlines— just like railroads, waterworks, electrical utilities, and most other networked systems—require concentration both to achieve economies of scale and to enable the cross-subsidization between low- and high-cost service necessary to preserve their value as networks. And when it comes to such natural monopolies that are essential to the public, there is no equitable or efficient alternative to having the government regulate or coordinate entry, prices, and service levels—no matter how messy the process may be.’
‘Why have we become so passive and reluctant to face up to the hard task of governing ourselves and our markets? We don’t need to recite “The Serenity Prayer.” We need to get out from under the thrall of the false prophets of deregulation, conservative and liberal alike, and make the benefits of true capitalism work for us once again.’
‘But now we find ourselves at a moment when nearly all the promises of the airline deregulators have clearly proved false.’ Those promises were greater competition, lower fares, and better service. Instead we’ve seen ongoing concentration of airlines through mergers and bankruptcies, convoluted and hidden fees, and worse service, including many airports that have have little or no service. The authors cite Cincinatti, Pittsburg, and other cities where airlines hav opted not to fly, which is the unintended consequence of deregulation.
‘And it’s about to get worse. Despite a wave of mergers that is fast concentrating control in the hands of three giant carriers, the industry remains essentially insolvent. Absent any coherent outcry, the directors of these private corporations remain free to respond to the crisis in the manner of an electrical utility company that, when it runs short of money, simply cuts off power to the neighborhoods of its own choosing.’
‘Despite massive consolidation, steep cuts in wages and benefits, sharply rising fares, huge direct and indirect subsidies, and a slowly recovering economy, the industry remains unable to service its debt, and its executives—now serving at the whim of Wall Street— see no way out except to continue to merge and to cut capacity.’
The US learned the lessons of unregulated transportation in the robber baron era of railroad expansion, and applied it in the ‘30s to the airline industry. But by the ‘70s the lessons had been forgotten and neoliberal-inspired deregulation led to the unwinding of the Civil Aeronautics Board, and the mess we are confronted with today.
We should fix it like we did in 1938.
And perhaps the biggest takeaway is that so little has changed since Longman and Khan published Terminal Sickness5 in 2012.
