Pros and Cons of Airline Deregulation Essay Example

Pros and Cons of Airline Deregulation Paper Deregulation has brought charges that safety has been reduced in the transportation industries. Although theory suggests that safety might be lower in a competitive market than in a regulated one, experimental evidence shows that safety has not declined since the transportation industries were deregulated but has actually continued to improve. Even though deregulation and partial deregulation have brought great benefits to the economy and to the consumer, some interests have been adversely affected. In the airline industry, organized labor has been the principal loser. To this day, the major airlines are attempting to bring down their inflated labor costs. A number of airlines have established dual pay schemes where new employees are paid less. The deregulation process received a great boost in 1977 when President Jimmy Carter appointed Alfred Kahn to chair the CAB. This quintessential policy entrepreneur took charge at the perfect time. With a powerful intellect, a dedication to microeconomic efficiency, and a quick and infectious humor, Kahn set about reorganizing the CAB. Under Kahn, the board decided several landmark cases that tested open entry and unrestricted price competition (Civil Aeronautic Board 1978). The policy options, now, were narrowing. Early in 1978, both houses of Congress passed bills to liberalize regulation. Airline executives, such as American’s Crandall, faced with the prospect of a policy â€Å"that would leave the airlines half free and half fettered,† now shifted gears and called for the total elimination of economic regulation. In October, 1978, Congress passed the Airline Deregulation Act. President Carter signed it ten days later. We will write a custom essay sample on Pros and Cons of Airline Deregulation specifically for you for only $16.38 $13.9/page Order now We will write a custom essay sample on Pros and Cons of Airline Deregulation specifically for you FOR ONLY $16.38 $13.9/page Hire Writer We will write a custom essay sample on Pros and Cons of Airline Deregulation specifically for you FOR ONLY $16.38 $13.9/page Hire Writer The act then place maximum reliance on competitive market forces. The Civil Aeronautics Board would automatically certify entry, unless doing so damaged the public interest. Fares would be flexible within a wide zone of reasonableness, and mergers would be readily approved. If all went well, the Civil Aeronautics Board would cease to exist by 1985 (Crandall 1978). The first year of airline deregulation was one of the most difficult years of the history, commented Bob Crandall. As an industry, Airline Company seemed bent on giving away the store. And 1980 proved worse still. All but two of the major carriers lost money, with American Airlines’ first half losses the worst in the industry. Passenger traffic slumped because of the recession, and the price of jet fuel had doubled again. Intense competition for key routes, with wild fares discounting, caught the industry and its regulators by surprise. The major carriers were not at all prepared for the suddenness of competition. Although the deregulation act had proposed an orderly phase-out of regulation, reallocation of routes and fare competition swept past the board’s half-hearted attempts at stabilization. By the spring of 1980, carriers were virtually free to determine the routes they served and the prices they charged (Office of Economic Analysis 1982). In May, 1979, World Airways, a former charter, offered a one-way fare of $108 between New York and Los Angeles and New York and San Francisco. This touched off the â€Å"transcontinental wars† among the major carriers, under-cutting revenues of more than $750 million, just for those two routes. TWA expanded the war to the semi-transcontinental market, matched by all of the other majors. Pricing madness went from bad to worse when Eastern tried to enter, with an unrestricted transcontinental fare of $99. World went to $88, the others matched, and the price war spread to â€Å"peripheral transcontinental markets of Boston, Washington, and Philadelphia (Praskell 1981). Hastily, the majors began dropping unprofitable routes and entering the potentially profitable markets of their competitors. Braniff challenged American in the Southwest, while Delta attacked American’s hub at Dallas from the East. Eastern expanded out of LaGuardia toward the west, and United contested more of the major city-pair markets connected to its hub in Chicago. Such unrestricted competition forced a dilution of yields, pushing break-even load factors higher. Accelerated hubbing was the clearest short-term strategic response by the major carriers. This practice, of concentrating connecting flights at a particular airport, had been Intense competition for key routes, with wild fares discounting, caught the industry and its regulators by surprise. The major carriers were not at all prepared for the abruptness of competition. Although the deregulation act had proposed an orderly phase-out of regulation, reallocation of routes and fare competition swept past the board’s half-hearted attempts at stabilization. By the spring of 1980, carriers were virtually free to determine the routes they served and the prices they charged (Office of Economic Analysis 1982). Used to a limited extent since the 1960s, both Delta and Eastern had developed a significant hub at Atlanta; United at Chicago; American at Dallas, and Allegheny (now US Air) at Pittsburgh. But hitherto, regulation had severely constrained the use of the hub-and-spoke route structure as an operating strategy. Only after receiving route flexibility could the majors contemplate the potential economies of scale and scope that the hub-and-spoke system had to offer. In terms of strategy, organizational structure, and performance, American Airlines’ adjustments to deregulation, starting as the second-largest, but least efficient of incumbent domestic carriers, was the most thoroughgoing and successful. As such, it provides the sharpest contrasts for examining the effects of regulatory change on business practice. Conversely, its size and revealed market power show how effective strategy, like regulation, can shape market structure to create sustainable rents. American Airlines was not prepared for deregulation. Its break-even load factor was the industry’s highest. Its labor costs were higher than the industry average and its productivity growth lower. Its fleet was the least fuel efficient, and its route structure the industry’s most fragmented. During the period in which regulation broke down (1968-1974), American’s management had made several serious errors: overexpansion into hotel properties, acquisition of too many wide-bodied aircraft, cutbacks in the development of computerized reservation systems, a failed merger attempt, and, finally, a managerial crisis. In September, 1973, George Spater, American’s chairman, admitted to making an illegal contribution to the Nixon campaign. He resigned, leaving American with operating losses, major organizational problems, and ruined morale (Serling 1985). C. R.  Smith, American’s colorful chief executive from 1934 to 1968, came out of retirement just long enough to choose a new chairman – an outsider named Albert Casey, president of the Times Mirror Company. Casey, a rough-and-tumble Boston Irishman with a self-deprecating sense of humor, specialized in finance, liked a lot of people, but knew nothing about airlines. His immediate challenge was to restore confidence and eventually, to prepare the organization for the demands of deregulation. The effects of deregulation on market structure and performance were just as dramatic as on industry structure, but not quite so clear. Several exogenous events, including the second oil shock, the air traffic controllers (PATCO) strike in 1981, and the 1982-1983 recession, also shaped the patterns of adjustment. With this qualification in mind, we can observe significant changes in the following market characteristics: first, entry and exit conditions, second, price level and pricing mechanisms, third, segmentation, fourth, distribution channels, fifth, cost structure, sixth operations, seventh, demand eight, service levels (and safety), and nineth, industry profitability. Entry into the industry and into individual city-pair markets clearly opened up as soon as the CAB lowered its barriers. Relatively low minimum-efficient scale and capital costs made this possible, but few of these entrants survived to 1988. Despite the hopes of economists, particularly those associated with contestability theory, the airline industry did not turn out to be frictionless (Panzar and Willig 1982). By building economies of scale and scope, by segmenting markets with strategic pricing, and by developing control of distribution channels, the incumbent firms responded strategically to create competitive advantages and eventually foreclose entry. As the data came in, economists revised their views of the industry’s contestability. At best, it appeared to be a transitional condition. Deregulation prompted an immediate reduction of prices and a continuing fragmentation of pricing structure. Here too, the early pricing responses seemed to support the logic of contestability. Even monopolists lowered their fares. Eventually though, prices stabilized in the least competitive markets and then increased. Price structure, meanwhile, fragmented into a wide range of special packages, discounts, and incentive deals. By 1987, the proportion of passengers using some sort of discount fare had risen from 37 percent (1977) to 91 percent (Airline Deregulation 1988). Sophisticated customer and competitor analyses, drawing on computerized data bases, was performed daily to optimize revenue by adjusting schedules, fares, and seat allocations among discount categories. This development should not have been surprising, in view of airline economics and a history of similar, although constrained, pricing practices. Commodity like, price wars at the outset of deregulation were partly the result of the market’s desegmentation. Carriers only gradually implemented strategies to resegment the market by price, service, brand image, and loyalty. Among the most striking features of airlines deregulation was the development and newfound strategic importance of distribution channels (methods of selling tickets). Under regulation, distribution channels were unimportant and unsophisticated. But with the transition to competition, customer access and control suddenly became critical for sellers, while the fluidity of adjusting markets caused extreme informational problems for buyers. Computerized reservation systems, with a relatively small incremental cost of adding a travel agency and huge economies of scale and scope, quickly became a competitive bottleneck that first movers took a tremendous advantage of. By 1988, American (SABRE) and United (APOLLO) controlled 70 percent of the travel agency channel, leaving competing systems (TWA, Delta and Eastern) with too small a base and other carriers in abject dependency. Accordingly, Frontier and ten other carriers brought a civil antitrust suit, seeking damages and divestiture of SABRE and APOLLO. The case was based on the essential facility doctrine – the same concept that the government had used successfully to attack the Bell System. Although civil charges were dismissed late in 1988, the Department of Transportation continued to review proposals for divesting the airlines of their reservation systems. Cost reduction was a predictable result of deregulation. The most dramatic and politicized aspect of this process was the deco sting of labor. Elimination of work rules, increases in hard hours for flight crews, and wage givebacks all contributed to lower costs. Continental, by reducing labor costs to 1. 33 cents per available seat mile, set a competitive baseline for the others. Delta, even with its traditionally nonunion work force, remained at the high end with costs of 3. 54 cents per average seat mile. Like American, every major carrier eventually moved to reduce costs across the entire range of operations, fuel, overhead, fleet and route structure, as well as labor. In all, the cost per passenger-mile traveled declined by about 30 percent 1981 and 1987. On the other hand, since November 1974 airfare increases have outpaced the rate of inflation, President Jimmy Carter (D, 1977-1981) shared Senator Kennedy’s views on this issue. In 1975, he endorsed legislation to provide airlines with greater flexibility to reduce airfares, ease Civil Aeronautics Board’s regulations on trunk entry, and made it easier, with some protections for small communities for airlines to eliminate nonprofit able routes. The airline industry strongly opposed the relaxation or elimination of national government rules concerning entry and exit of air routes and passenger ticket prices. During congressional hearings, they testified that head to head competition might cause ticket prices to fall, but it would also bankrupt many smaller airlines, leading to the concentration of airline service into just a few large carriers that could conceivably, control the marketplace and impose even higher fares on passengers than before deregulation took place. For example, Robert Six, chairman of the board and chief executive officer of Continental Airlines, Inc. estified before the U. S senate Commerce Committee that deregulation will not lead to a more competitive situation. Rather, it is liable to result in a period of initial chaos and ultimately in a situation in which most of the air transportation system will be in the control of a few industry giants. The aviation industry also argued that deregulation would cause service reductions and in some instances complete elimination of service along many less profitable air routes, particularly those serving rural states and small-population cities. They also worried that deregulation would frighten investors making it more difficult for them to finance badly needed equipment facilities. They also warned that deregulation would adversely affect air safety because price competition would force airlines to defer maintenance and keep airplanes in service as long as possible. The industry’s labor unions also opposed deregulation. They feared that increased price competition might make it more difficult for them to win wage and salary concessions at the bargaining table. While Congress debated deregulation’s pros and cons, Alfred Kahn, President Carter’s choice to head the Civil Aeronautics Board, was sworn into office on June 10, 1977. He systematically altered the Civil Aeronautics Board’s regulatory behavior to allow airlines to fly as many routes as possible and at the lowest fares that they could afford. As airfares fell across the nation, Kahn received extensive and very positive media coverage. Although Congress was probably going to deregulate airlines regardless of Khan’s actions, the favorable publicity concerning Khan’s effort signaled to many on Capitol Hill hat it would be political suicide to fight airline deregulation. Sensing an opportunity to destroy its new competition, the larger airlines systematically reduced passenger airfares on routes also flown by the new start-ups. The practice was called predator pricing. The idea was to outlast the new start-ups and later recoup losses by raising passenger airfares after the start-ups were driven out of business. The strategy worked for Northwest Airlines. Its discount pricing forced People Express to abandon its Newark to the Twin Cities route. Northwest Airlines’ hub was at the Twin Cities Airport. However, in most instances, predator pricing resulted in economic losses for all airlines. Eastern Airlines, for example, lost to much money trying to kill off World Airline coast-to-cost routes that it was forced to withdraw from transcontinental service altogether. Also, United Airlines nearly went bankrupt trying to kill off People’s Express. By the late 1980s, predator pricing and other factors forced many start-ups into bankruptcy and many others to merge with other airlines. Overall, deregulation increased the number of air carriers but American, Delta, and United continued their dominance over the U. S market. Deregulation changed the basic nature of air service in the United States. Before deregulation most airlines exchanged passengers freely at major airports, a practice called interlining. After deregulation, airlines tried to keep their passengers to themselves. They discovered that it was more profitable to provide nonstop passenger air service between several major hubs instead of offering point to point, nonstop air service to numerous communities across the nation. Conclusion The airline industry appears to be evolving towards the segmented structure that existed prior to deregulation a small number of large trunk carriers offering long haul domestic and international services, regional carriers offering short and medium haul services within geographic areas and commuter carriers offering very short haul services to small communities. In aviation’s formative years, this structure was developed and controlled by government regulators. However, today’s evolution toward the segment marketplace is being driven and controlled by market forces with low entry barriers. Regulation has been a long-standing and indeed necessary feature of the airport transport industry the world over. Many countries, however, are now questioning the effectiveness, and indeed the relevance, of such regulations. More generally, questions are being asked about the appropriate balance between public and private sectors in the industry, whether existing regulations and operating structures are compatible with the introduction of new technology and more intense international competition, and many nations have sought to evaluate more systematically the overall contribution, an costs, of their ports to both domestic economic growth and inter-modal transport systems. In short, the world’s ports have reached a critical historical juncture. To date, however, airport reform in many countries has simply equated with labour reform, or more precisely a derogation of employment and working conditions. The propriety of such reform programmed must be questioned and, on the basis of the evidence presented in this paper. In developing countries in particular, where social protection for redundant workers is often more notable by its absence, the adverse effects of deregulation are indefensible. Furthermore, the experience of many countries suggests that deregulation by no means guarantees any improvement in airport performance. In fact, the long-term result may be the opposite. In contrast, there are several countries/ports where significant improvements in airport performance have been achieved while basic standards of employment have been at least maintained, if not improved. Thus, in several cases, productive efficiency continues to be founded on equity and efficiency in the labour market.

10 Deductive Essay Topics on Emma Larkin’s #8220;Finding George Orwell in Burma#8221;

10 Deductive Essay Topics on Emma Larkin’s #8220;Finding George Orwell in Burma#8221; If you are looking for facts on Emma Larkins Finding George Orwell in Burma so as to write a deductive essay, there are a handful of great facts from the book which pertain to the book to help you in your writing. These ten facts can prove most useful in helping you to support the claims you might be making in your next essay: In the book â€Å"Finding George Orwell in Burma†, Emma Larkin shows how the government of Burma uses surveillance, censorship, imprisonment, and the rewriting of history to instill fear in its citizens. The government has complete surveillance on its people. The Military Intelligence spies and informers are something spoken about often in the book, something which is so prevalent that people are always afraid to speak out or work with foreigners for fear of being reported to the spies. The emergency provisions act of 1950 provided the government with the ability to sentence any local citizen caught informing foreigners to seven years in prison. This law, and the threat of military intelligence spies contributes even more to the fear of being caught. Fear of having the wrong ideas, of speaking to the wrong person, all of that fear is what breaks apart groups and prevents individuals from sharing their same thoughts or concerns and rising up. When people do rise up, as they did in 1988, the government rewrites history. The generals were rewriting history is a quote from the book which shows how the government rewrote the names of places, streets, buildings, and even disposed of dead bodies and washed away blood from the streets as a way to make all of the people involved in the uprising literally disappear. They did not just kill them, they erased them from history. They erased the memory of the uprising and more. By erasing any evidence of an uprising as well as the evidence of what the government did to those who try to uprising is one of the many ways that the government is able to not only retain fear but use the tool of rewriting history. The Burmese government has a propaganda branch as well as a censorship board both of which work together to produce specific content which has already been approved for magazines as well as newspapers. These two units even create the curriculum for all schools. By censoring all media, the Burmese government is able to maintain complete control of the people by alleviating any potential for motivation or uprisings, and also ensuring that people only hear what the government wants them to hear. By limiting what people have access to, they limit what people think. The government even limited foreign influence. Foreign journalists and writers are not allowed into the country and anyone who has a notebook, camera, or other type of photographic film is continually under surveillance for the duration of their trip. Materials can be reviewed by police as well as military intelligence spies who can delete items that they do not want the individual having. They even have the ability to take away the physical instruments such as a camera and immediately deport the person who owned the camera. If an individual is filming or taking pictures of those locals who are filmed or photographed are also at risk for being detained by police. All of these tools which are used by the government are highly spoken about by Aung San Suu Kyi and reflect strongly on George Orwells contents contained in 1984. Panopticon is the term from George Orwells writing which remains at the center of this type of surveillance. Other terms are also prevalent. Newspeak is a wonderful term which applies to the content distributed by the censorship board. Room 101 refers most strongly to detainees. Another main theme in the writing of George Orwell is out of surveillance. Big brother surveys every aspect of life and infiltrates even the thoughts of its citizens in much the same way that the Burmese do to their people today. Aung San Suu Kyi’s father was a democratic leader of Burma until a coup left him dead. Aung San Suu Kyi took over her father’s role and was soon punished by the military leadership in charge. She married an Englishman and with him had two children, but when she spoke out against the corruption in the government she was placed under house arrest and prohibited not only from seeing her children, but in many cases from having her children visit her. Aung San Suu Kyi was elected in a democratic process once already but the military leadership declared that they were not going to give up their power, after which San Suu Kyi was placed again either in phases of house arrest or would be allowed to leave the country but upon doing so, not allowed back in. She continued to fight alongside her party and to raise international awareness about the seriousness of the human rights abuses. She went on a hunger strike while under house arrest which garnered a great deal of media attention. As of 2015, Burma had open and free elections yet again, and this time Aung San Suu Kyi’s party was elected yet again. The military has stated that it will not contest the results and that it plans to allow the party to assume its role as the new leader. If this takes place, the new party is allowed the authority not only to elect the leader of the country, but other cabinet members. As of late, the former military power changed the constitution to prohibit San Suu Kyi from attaining the role of president, which is a rule that can be overturned if the military leadership keeps to its word and allows the party and San Suu Kyi to assume the power they have been given by their people through the 2015 elections. This book is very interesting to research. That’s why there are also 20 topics on â€Å"Finding Orwell in Burma† by E. Larkin that can be tackled by writing a deductive essay according to our guide. References: Cady, John F.  A history of modern Burma. 1960. Chakraborty, Basanti D. Aung San Suu Kyi.  A Critical Pedagogy of Resistance. SensePublishers, 2013. 121-123. Davison, Peter, Hoepffner Prà ©face de Marie Hermann, and Jean-Jacques Rosat.  George Orwell. Palgrave Macmillan, 1996. Harvey, Godfrey Eric.  History of Burma. Asian Educational Services, 2000. Kyi, Aung San Suu.  Aung San Suu Kyi. 1989. Kyi, Aung San Suu. Freedom from fear.  Index on Censorship  21.1 (1992): 11-30. Kyi, Aung San Suu. Voice of hope.  Index on Censorship  26.3 (1997): 162-168.

Who does the task People or machines. What is the right mix Essay

Who does the task People or machines. What is the right mix - Essay Example A task is the name or identification of a simple work or a complex project that can have sub-tasks or strings of works attached to it (Anderson 1999). Going by this it is a representation of a structure of activities. Such activities, in an industrial or a production context could mean involvement of both men and machines for its execution or implementation. The task in the earlier days was entirely conducted by men and was thus people oriented and they used a few tools in order to organize the task or ease its progress. These tools could be said to be simple form of machines and were invented or improvised by people to facilitate the conduct of their work for carrying out the task to their satisfaction. With advance in civilization and knowledge people invented machines first to simplify their tasks and later to provide assistance in their task. In modern times there a many tasks that are carried out with the use of machines only requiring no human intervention which make the task almost entirely machine oriented. It can be seen that tasks have become more complex with the advent of time but the two ends of the spectrum have remained people and machines. Apparently one cannot do without the other and this raises the questions of importance, relevance, priorities and hierarchy that are manifest in the topic â€Å"Who does the task? People or machines†. Before the Industrial Revolution work was generally people oriented. The worker was the one who planned work and executed it, using and manipulating various tools of his trade to assist him in increasing productivity, improving quality and reducing costs. With introduction of mechanization in the late 18th century the concept of division of labor became an important feature that took away the characteristic of ownership of the work from a person to several persons. This was generally the time when Adam Smith in his book Wealth of Nations (1776) stated that labor [meaning