Regulation of Airline Industry - Essay Example

In this regard, the industry competition is somehow diminished. Other airline companies may experience substantial profit reduction as their service offerings become relatively less competitive as compared to big industry players. Given the above, the government must intervene by implementing policies that would promote competition within the airline industry. By enforcing policies such as the prohibition of oligopolistic/monopolistic business practices, the government can promote greater efficiency in the market (Samuelson & Nordhaus). Limit of Government Control in the Airline Industry As the government deregulated the airline industry, airlines have become better equipped in negotiating their operating arrangements with different airports as well as their entry and exit routes.

Furthermore, these airline companies have become better at levying airfares and supplying flights based on market demand (Doganis, “The Airline Business”). The deregulation boded well for both airline companies and their customers. However, with the anti-competitive practices discussed above, the objective of deregulation is being violated. Given this, the government should somehow tighten its control over the industry such that competition and consumer welfare are promoted.911 Terrorist Attacks With the September 11 attacks, the airline industry experienced an economic shock as people became traumatized by flying.

Furthermore, security restrictions rendered traveling more difficult. Considering this, thousands of employees were laid off as major airlines filed for bankruptcy. To address this, airline regulation became a vital component for rehabilitating the industry. During such tragic times, regulation by the government was crucial. Congress passed $ 15 billion in assistance to bail the industry out of trouble (Doganis, “The Airline Business”). In the same way, the security measures undertaken by the government were important in bringing back consumer confidence in flying.

When the government tightened security, particularly in airports, many people started traveling by air again. This helped revive the ailing industry. Perception of Government Regulation In line with the above discussion, government regulation is considered significant, especially during wars or economic downturns. In times of war, the government can restore the confidence of the public regarding flying and avoid another disaster by tightening security measures. This would drive up demand to fuel growth in the sector.

Similarly, when an economic slump occurs, the government can provide financial assistance to companies that are burdened with substantial operating losses to the point of bankruptcy. In addition, the government may be an effective mediator in airline labor actions. With government intervention, the continued flow of people, communication, and goods are protected (Doganis, “The Airline Business”)