Competition in a Deregulated Market for Air Travel: The U.S. Domestic Experience and Lessons for Global Markets

This paper presents evidence on the nature of competition in the post-deregulation U.S. air travel market. It begins with an historical review of the U.S. market since deregulation. An econometric study of domestic air fares for 1995 and 2000 is used to address the following questions: How does the level of competition on a particular route or in a particular airport affect fares? Does competition from low-cost airlines have an especially large effect on fares? Do hub-and-spoke systems make air travel cheaper for the consumer?