ARI SHAPIRO, HOST:
Earlier this summer, the TSA broke a record for the highest number of passengers ever passing through its gates. With all those passengers come many complaints. Erika Beras from Planet Money podcast explains that the state of flying is the result of a five-decade-long trend in the airline industry.
ERIKA BERAS, BYLINE: When Don Burr was a kid in the '50s and '60s, flying was a luxury, and it was out of reach for most people.
DON BURR: It was very enamoring, and it was exotic.
BERAS: Airlines would compete with each other on these amenities because they couldn't compete on price. Back then, the government regulated how many national airlines existed, their routes and what they charge passengers. If planes weren't full, the government would subsidize the flights. By the 1970s, Don was an executive at a small airline. He thought all this regulation was bad for the everyday passenger, and he wanted things to be different.
BURR: We went to Washington repeatedly.
BERAS: Oh, really?
BURR: Yeah, over and over and over to lobby people for deregulation, because we say, you know, it would make it so much easier to provide really good, solid transportation if we didn't have the heavy hand of the government always telling us what we could and couldn't do. So we lobbied and lobbied and lobbied.
BERAS: Consumer rights advocates argued deregulating the airlines would let more airlines compete, which would mean lower fares, so more kinds of people could fly. And in 1978, Congress overwhelmingly voted to deregulate the national airlines. This meant Don could start his own low-cost airline, and a couple years later, he did. He called it People Express. If you were hungry, you'd buy a snack pack. If you checked a bag, they charge you.
That sounds a lot like my airplane experience today.
BURR: Well, please don't compare us to Spirit because...
BERAS: I have a feeling you probably get that a lot, huh?
BURR: Yeah. Yeah, we do 'cause we were the first airline to unbundle the product. And the concept there is you pay for what you get.
(SOUNDBITE OF ARCHIVED RECORDING)
UNIDENTIFIED NARRATOR: The cost of everything is going up. But thanks to People Express Airlines, the cost of going up is going down.
BERAS: Soon, People Express was the fifth-biggest airline and a threat to legacy carriers like American Airlines because in this new post-deregulation world, airlines were competing on price.
BURR: American takes out double-spread ads in papers all over the country, saying, you no longer have to fly on People Express. They instantly, in that ad, were advertising prices at or below ours in all the markets were in.
BERAS: This was not great for Don's company.
BURR: When my mother called me and said she was taking American somewhere for Thanksgiving, I thought, oh, man, that really tells you where we're at.
BERAS: Your own mother?
BURR: Yeah, my own mother. Yeah. Yeah.
BERAS: Ay (ph).
BURR: Right. So she says she got a better price on American.
BERAS: But it was great for passengers. In these years, there were dozens of new airlines. But the established legacy airlines had deeper pockets. Eventually, many of these upstarts went bankrupt or merged, including People Express. It merged with Continental, which eventually merged with United. Deregulation was supposed to increase competition, but today, there are actually fewer national airlines than there were before deregulation. American, United, Delta, Southwest own nearly 70% of the market, and all airlines have embraced cost cutting.
What has kept prices low is a second wave of low-cost airlines has started growing in the 2000s like Spirit and JetBlue. Deregulation was also supposed to make flying more accessible - and it has. Now, almost 90% of Americans have flown. It made flying cheaper, but it also made flying feel cheaper. That was the trade-off.
Erika Beras, NPR News. Transcript provided by NPR, Copyright NPR.
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