The Geography of Deregulation in the U.S. Airline Industry

Abstract

The U.S. domestic airline industry was deregulated in 1978 as part of a regulatory reform movement that has transformed the banking, telecommunications, energy, and transportation industries. A geography of deregulation has emerged conforming to a core-periphery structure in which industries are increasingly controlled by fewer firms through their major headquarters and operations centers. As a consequence of industry consolidation and the shift to“hub-and-spoke” network service structures, strong domestic“hubs” (e.g., Dallas, Chicago, Atlanta) and international gateway cities (e.g., Los Angeles, New York, San Francisco) have emerged as the core control centers of the air-transport system, while“spoke” cities have become peripheralized in the process. The group of core centers has benefited more than the periphery from increased air transportation employment, frequency of service, passenger flow, and lower fares, except in cases where hubs were dominated by one or two airlines, where fares rose. The latter is manifested in a pattern of higher fares in the more concentrated hubs of the southeastern U.S. and their peripheral hinterlands.