A generation ago, Aguirre and his employees at Chiquita would not have had to face such a difficult choice. Until 1978, the United States viewed airline service as a “public convenience and necessity,” and used a government agency—the Civil Aeronautics Board, or CAB—to assign routes and set fares. This regulation was designed to ensure that citizens in cities like Cincinnati received service roughly equal, in quality and price, to that provided to other comparably sized communities like Charlotte. The government also made sure that smaller cities maintained vital links to the national air network.
In 1978, however, a group of liberals including Ralph Nader, Ted Kennedy, Kennedy’s then Senate aide Stephen Breyer, and an economist named Alfred Kahn, whom President Jimmy Carter chose to run the CAB, conjured up a plan to drive down the cost of airline fares by fostering more price competition among airlines. Though they called it “deregulation,” the practical effect of eliminating the CAB, especially after subsequent administrations abandoned antitrust enforcement as well, was to shift control of the airline industry from experts answerable to the public to corporate boardrooms and Wall Street.
Over the years, most Americans have adopted a pretty standard line about the results. On the one hand, complaining about the indignities of flying—overbooked, late, or canceled flights; surly flight attendants; and, more recently, terrible in-flight food service and high fees for checked baggage— has become a staple of American life, much like complaining about Internet providers or health insurance companies. On the other hand, we’ve told ourselves, at least the increased competition has made air travel cheaper. And at least most of us can still get where we need to go by air.
But now we find ourselves at a moment when nearly all the promises of the airline deregulators have clearly proved false. If you’re a member of the creative class who rarely does business in the nation’s industrial heartland or visits relatives there, you might not notice the magnitude of economic disruption being caused by lost airline service and skyrocketing fares. But if you are in the business of making and trading stuff beyond derivatives and concepts, you probably have to go to places like Cincinnati, Pittsburgh, Memphis, St. Louis, or Minneapolis, and you know firsthand how hard it has become to do business these days in such major heartland cities, which are increasingly cut off from each other and from the global economy.
And it’s about to get worse. Despite a wave of mergers that is fast concentrating control in the hands of three giant carriers, the industry remains essentially insolvent. Absent any coherent outcry, the directors of these private corporations remain free to respond to the crisis in the manner of an electrical utility company that, when it runs short of money, simply cuts off power to the neighborhoods of its own choosing.