Effects of Airline Deregulation

Undoubtedly the Airline Deregulation Act of 1978 was the single most important event affecting airports since 1903. Previously, air routes were established by the Civil Aeronautics Board (CAB), a throw-back from the early air mail era when airlines relied on revenue from the U.S. mail to survive. The federal government decided who carried the mail where and at what price. Later, CAB determined which routes each airline would fly and effectively limited competitive pressures in the new industry. Cities which would be unable to support air service in a purely market driven industry were connected by routes subsidized by the federal government.

In the deregulation act, the federal government loosened its control of the airline industry. Without government controls over airlines and their route structures, the airline business became a more competitive industry. Many airlines dropped unprofitable routes which were no longer subsidized in favor of more heavily travelled, profitable routes. New airlines sprung up, some literally overnight, to take advantage of new markets.

To improve efficiency and cut costs, airlines developed a "hub and spoke system" where some airports are used as a connecting point for passengers from different origins and destinations. Virtually all airlines use this system today.

Large airlines have two to five hubs. Many major cities have hub airports white other municipalities continue to seek airlines willing to develop hubs at their airports. 1n addition to adding thousands of new jobs to an area and an improved tax base due to related economic growth, "hubs bless a community with a unique synergy created by the comings and goings of thousands of people,"[1] as one observer put it.

Another major benefit for hub cities is the huge numbers of flights to choose from to many different destinations. If a passenger needs to travel between two major hubs, such as Detroit and Chicago, there are many flights on five airlines (American, Midway, Northwest, Southwest, and United) to choose from.

The result, however, is that many hub cities, like Detroit and Chicago, have very congested airports. The Federal Aviation Administration reports that while there are currently some 3,200 airports available to the public, the top 50 commercial airports accounted for more than 80 percent of all passenger enplanements in 1986.[2] In essence, airline activity is characterized by "hub to hub competition" in which airlines must be as efficient as possible in building successful hubs. The more people and destinations served through a hub, reflected in a higher percentage of filled airline seats, the greater the ultimate success of an airline in the post-deregulation era.[3]

But the facilities at such airports are often heavily overused. Many airports which were built to handle fewer than 300 flights per day are now handling more than 1,000. These extra flights require more runways, more gates, more parking, more efficient systems for transporting passengers while on the ground, more food and rental car concessions, more sophisticated baggage handling and control of aircraft traffic. The benefits of such activity lead airports to encourage rather than discourage growth. A recent article on air travel in Transportation Journal noted that:

One of the biggest problems facing the [airline industry] today is airport congestion, a condition exacerbated by the hub-and-spoke method of operations that concentrates all aircraft activity into certain narrow time periods during the day. Much of the scheduling problem at major airport hubs is a direct result of airlines' attempts to meet the demands of customers; that is, providing service at the times passengers want to fly. Unfortunately .... people tend to want to fly at the same times, so all the airlines schedule flights around those times. The inevitable result is delayed flights, which hurt everyone: passengers miss connections, airlines lose money as planes burn fuel on the ground, and the government air traffic control system gets saturated. However, the carriers do not feel they can curtail service since satisfying demand is the rule of the day. In other words, unless everyone reduced the number of flights offered, no one will do anything. [4]

At a newer facility such as Hartsfield International Airport in Atlanta, the infrastructure was specifically designed for this hub and spoke concept. Detroit Metropolitan's facilities were not. Yet in 1987, Detroit was the 10th busiest airport in the United States as measured by the number of aircraft take-offs and landings (also known as "movements") which occur each year (see Table 1). As one would expect, this has created an enormous strain on the infrastructure in Detroit.



City Airport

Total Aircraft Movements

Airline Movements

General Aviation[5]

1. Atlanta-Hartsfield




2. Chicago-O'Hare




3. Los Angeles International




4. Dallas/Fort Worth




5. Denver-Stapleton




6. San Francisco International




7. Boston-Logan




8. Phoenix-Sky Harbor




9. St. Louis-Lambert








Source: Federal Aviation Administration, FAA Air Traffic Activity: FY 1987, 1987: Washington. D.C., Table 4, pp. 15-45.

Deregulation has had a direct effect on airports such as Detroit Metropolitan Airport and passengers. Older facilities, not designed for a hub system, have clear physical limitations which affect their users.

Metro Airport, for example, has a relatively decentralized system of terminals and concourses (see Diagram 1). For many years each airline had its own concourse or part of concourse. Passengers at Metro were either arriving at or leaving the Detroit area rather than connecting from one city to another through Metro. When travelers arrived at the airport and parked their cars, they walked first to the ticket counter for their airline of choice. They then moved to the appropriate concourse – within easy walking distance – where that airline parked its aircraft. However, like other large cities, deregulation made Detroit an attractive city in which to locate an airline hub.

At a hub, a substantial number of passengers arrive on one aircraft to depart on another. One airline tends to dominate an airport and uses a large portion of the airport's space. Passengers must determine where the appropriate aircraft is parked and walk to it. Many of the passengers who fly on Northwest Airlines, the largest airline in Detroit with approximately 57% of all passengers, are required to walk very long distances (see Diagram 2).

The current design creates passenger problems because the system was not built to handle the huge numbers or sizes of aircraft currently using the gates in Detroit. Larger wingspans require more space when an aircraft is parked at a terminal. Before deregulation, most of the aircraft using Detroit were relatively small Boeing 737s or 727s or McDonnell-Douglas DC-9s. The wingspan on these aircraft was as short as 93 feet. The newest generation of aircraft more commonly found at hub airports are the Boeing 757, 767, 747 or the DC 10 which boast wingspans ranging to 196 feet. This results in very crowded parking areas and fewer aircraft being able to park.

The physical constraints of airports like Detroit Metropolitan have limited the consumer benefits of the Airline Deregulation Act. The director of Detroit Metropolitan Airport argues that:

Most major airports have finite geographical, political, legal and financial limits. As a consequence, from the national perspective, it is obvious (i) that construction of additional airport facilities has not kept pace with the growth of the airline enplanements and operations, (ii) that delays caused by inadequate airport facilities have become a major component of the overall delay problem and (iii) that the entry of new carriers into major airports, while it has not been blocked, has been confined and modulated to the extent that serious competitive threats to incumbent carriers have seldom been posed. [6]

In effect, the airlines were freed from the burden of government regulation but the airports were not. As facilities must be upgraded and expanded to keep pace with demand, so also must the management and revenue structure of airports further evolve to best meet this demand.

This paper suggests that airports like Detroit Metropolitan Airport establish a new direction in airport operation in the United States.