The domestic US airline industry has been intensely competitive since it was
deregulated in 1978. In a regulated environment, most of the cost increases were
passed along to consumers under a fixed rate-of-return based pricing scheme. This
allowed labor unions to acquire a lot of power and workers at the major incumbent
carriers were overpaid.
After deregulation, the incumbent carriers felt the most pain, and the floodgates had
opened for newer more nimble carriers with lower cost structures to compete head-on
with the established airlines. There were several bankruptcies followed by a wav…
