Policy Study

Airline Deregulation

The Unfinished Revolution

Executive Summary

In the 20th anniversary year of airline deregulation, air travel is again at the forefront of public policy. Policymakers have been besieged with a variety of complaints: that business fares are up, some smaller cities are not receiving the kinds and amounts of air service their residents would like to have, that small start-up airlines can’t compete effectively, as well as continued consumer complaints about congestion and delays. A variety of solutions have been proposed, including, for the first time since 1978, federal control over some of the prices charged and routes served by major airlines.

Any return, however, to a regulatory system that has the government micromanaging routes and services would be misguided. Such a “solution” would do little to improve air travel and would cause significant harm to consumers. Despite the criticisms, airline deregulation has provided-and continues to provide- enormous benefits to the average traveler. Economists from the Brookings Institution and George Mason University have estimated that consumers save some $19.4 billion per year thanks to the lower fares resulting from a competitive airline marketplace. American cities have been offered much greater air travel access, thanks to an aviation marketplace in which airlines are free to provide service when and where demand exists, without having to seek permission from central planners. Millions of Americans began to fly for the first time in their lives. Airline deregulation democratized air travel in America.

There are, of course, serious problems remaining. But these problems stem not from too much reliance on market forces, but too little. In deregulating the airlines in 1978, Congress unleashed market forces on one segment of the air-travel system-but failed to free up the critical infrastructure on which the airlines depend, namely the airports and the air traffic control (ATC) system. These essential elements of the air travel system remain not only government-controlled, but government-owned.

Not surprisingly, problems emerged when a consumer-responsive airline industry placed demands on a still bureaucratically controlled infrastructure. The problems typically have been blamed not on the infrastructure managers, largely invisible to the traveling public, but rather on the airlines themselves. This is unfortunate. Instead of reregulation, today’s real policy challenge should be to remove the remaining government interventions in aviation infrastructure that restrict competition and hinder the growth of new forms of airline service.

The benefits of such reform could be substantial. For instance, new technology exists which could produce up to a 50 percent increase in capacity at congested airports like LaGuardia and Washington National, and which could greatly expand the number of air routes between cities. But these new technologies are only likely to come about in a timely fashion if the structure and funding of today’s obsolescent air traffic control system is dramatically changed. As the National Civil Aviation Review Commission found, the ATC system must be turned into a businesslike organization, funded directly by its users.

Another key policy reform is for airports to be free to expand their capacity directly, rather than wait for the FAA to make runway grants or to install upgraded landing equipment. Congested airports should be allowed, for instance, to levy market-based access charges during peak hours, with the revenues earmarked for capacity-enhancing investments within the same metro area. Reliever airports in the Chicago, New York, and Washington areas could provide nonstop regional jet service to supplement service offered at the existing congested airports.

In short, technology and intelligent policy changes can give us a much higher-capacity, more-competitive airline market. Policymakers should resist the temptation to micromanage who flies where. Instead, they must finish the job they started in 1978, by freeing up aviation’s infrastructure to cope with a dynamic, evolving aviation marketplace.


Viggo Butler is chairman of United Airports Limited and the retired president of Airport Group International and its predecessor, Lockheed Air Terminal. He received his B.A. from California Polytechnic and his M.B.A from Pepperdine University; he served as a USAF captain supervising air traffic control.

Robert Poole is director of transportation policy and Searle Freedom Trust Transportation Fellow at Reason Foundation. Poole, an MIT-trained engineer, has advised the Ronald Reagan, the George H.W. Bush, the Clinton, and the George W. Bush administrations.

Surface Transportation

In the field of surface transportation, Poole has advised the Federal Highway Administration, the Federal Transit Administration, the White House Office of Policy Development, National Economic Council, Government Accountability Office, and state DOTs in numerous states.

Poole's 1988 policy paper proposing privately financed toll lanes to relieve congestion directly inspired California's landmark private tollway law (AB 680), which authorized four pilot toll projects including the successful 91 Express Lanes in Orange County. More than 20 other states and the federal government have since enacted similar public-private partnership legislation. In 1993, Poole oversaw a study that coined the term HOT (high-occupancy toll) Lanes, a term which has become widely accepted since.

California Gov. Pete Wilson appointed Poole to the California's Commission on Transportation Investment and he also served on the Caltrans Privatization Advisory Steering Committee, where he helped oversee the implementation of AB 680.

From 2003 to 2005, he was a member of the Transportation Research Board's special committee on the long-term viability of the fuel tax for highway finance. In 2008 he served as a member of the Texas Study Committee on Private Participation in Toll Roads, appointed by Gov. Rick Perry. In 2009, he was a member of an Expert Review Panel for Washington State DOT, advising on a $1.5 billion toll mega-project. In 2010, he was a member of the transportation transition team for Florida's Governor-elect Rick Scott. He is a member of two TRB standing committees: Congestion Pricing and Managed Lanes.


Poole is a member of the Government Accountability Office's National Aviation Studies Advisory Panel and he has testified before the House and Senate's aviation subcommittees on numerous occasions. Following the terrorist attacks of Sept. 11, 2001, Poole consulted the White House Domestic Policy Council and the leadership of the House Transportation & Infrastructure Committee.

He has also advised the Federal Aviation Administration, Office of the Secretary of Transportation, White House Office of Policy Development, National Performance Review, National Economic Council, and the National Civil Aviation Review Commission on aviation issues. Poole is a member of the Critical Infrastructure Council of the Los Angeles Economic Development Corporation and of the Air Traffic Control Association.

Poole was among the first to propose the commercialization of the U.S. air traffic control system, and his work in this field has helped shape proposals for a U.S. air traffic control corporation. A version of his corporation concept was implemented in Canada in 1996 and was more recently endorsed by several former top FAA administrators.

Poole's studies also launched a national debate on airport privatization in the United States. He advised both the FAA and local officials during the 1989-90 controversy over the proposed privatization of Albany (NY) Airport. His policy research on this issue helped inspire Congress' 1996 enactment of the Airport Privatization Pilot Program and the privatization of Indianapolis' airport management under Mayor Steve Goldsmith.

General Background

Robert Poole co-founded the Reason Foundation with Manny Klausner and Tibor Machan in 1978, and served as its president and CEO from then until the end of 2000. He was a member of the Bush-Cheney transition team in 2000. Over the years, he has advised the Reagan, George H.W. Bush, Clinton, and George W. Bush administrations on privatization and transportation policy.

Poole is credited as the first person to use the term "privatization" to refer to the contracting-out of public services and is the author of the first-ever book on privatization, Cutting Back City Hall, published by Universe Books in 1980. He is also editor of the books Instead of Regulation: Alternatives to Federal Regulatory Agencies (Lexington Books, 1981), Defending a Free Society (Lexington Books, 1984), and Unnatural Monopolies (Lexington Books, 1985). He also co-edited the book Free Minds & Free Markets: 25 Years of Reason (Pacific Research Institute, 1993).

Poole has written hundreds of articles, papers, and policy studies on privatization and transportation issues. His popular writings have appeared in national newspapers, including The New York Times, The Wall Street Journal, USA Today, Forbes, and numerous other publications. He has also been a guest on network television programs such as Good Morning America, NBC's Nightly News, ABC's World News Tonight, and the CBS Evening News. Poole writes a monthly column on transportation issues for Public Works Financing.

Poole earned his B.S. and M.S. in mechanical engineering at Massachusetts Institute of Technology (MIT) and did graduate work in operations research at New York University.