Times Uses Economist's Obituary to Jab at Successful Airline Deregulation
Business reporter Robert Hershey Jr.'s obituary for the Cornell economist who promoted airline deregulation ("Alfred Kahn, Chief Architect of Airline Deregulation, Dies at 93") worked in some shots at the wildly successful process that unleashed the free market to cut fares and got more people in the air.
Alfred E. Kahn, a Cornell University economist best known as the chief architect and promoter of deregulating the nation's airlines, despite opposition from industry executives and unions alike, died Monday at his home in Ithaca, N.Y. He was 93.
Is freedom of travel the sole purview of airline executives and unions?
Before deregulation, the airlines were tightly controlled by the Civil Aeronautics Board, which approved routes and set fares that guaranteed airlines a 12 percent return on flights that were 55 percent full. The changes Mr. Kahn orchestrated resulted in increased competition, lower fares and the rise of low-cost carriers like JetBlue and Southwest. But they also created severe financial problems for the industry, leading to bankruptcies and mergers.
"I have to concede that the competition that deregulation brought certainly was terribly, terribly hard on the airlines and their unions, who had heretofore enjoyed the benefits of protection from competition under regulation," Mr. Kahn said decades later.
He added that he accepted "some responsibility" for the industry's financial problems but said that it had eventually recovered, despite sharply rising oil prices and terrorist-related security costs.
Hershey recounted the amusing tale of Kahn's reaction to being rebuked by the Carter administration for warning of a "very serious depression." (He began referring to the possible economic downturn as a "banana" in public talks.) Then it was back to implicit criticism of airline deregulation.
Mr. Kahn, drawing on considerable gifts of persuasion and media insight, led the struggle for enactment of the Airline Deregulation Act of 1978, the first total dismantling of a federal regulatory regime since the 1930s.
Washington, he argued in various settings, had long fostered airline inefficiency and by thwarting competition was enabling carriers to keep fares artificially high.
While the industry was financially battered by the new law and some smaller cities lost service, Mr. Kahn over the years stoutly defended his handiwork by saying that many more Americans were flying with greater choice of carriers and at lower fares than ever before.
Hershey downplayed the undeniable positive effects for actual citizens, more of whom were able to travel because of the deregulation, which was pushed through by the ultraliberal Sen. Ted Kennedy. Since then, ticket prices have been cut in half and the number of airline passengers has tripled, according to a 2009 tribute to Kennedy's efforts from the Wall Street Journal.