Costs under Regulation and Deregulation: The Case of US Passenger Airlines*

Abstract

Kenyon C o k e privatizarion, thrrunovalof~ularorycona~lMdsimilarchanges in p r o m rights within jbms can be apcted to shifi cost fimcrions downward and p e d increased output, b w e r j k l service prices and more eff;icnt rcjowce ahcation The US AiriLv Lkrquhtion Act of 1978 was clearly apected to have these &ect.% Thirpaper investigates whether the wi&ty anticipated reduction in costs following the Airline Dngulation Act of 1978 actually occwcd We utilize an empirical ptoccdwc that erplicitiy taker the multi-product characterish into account and identifies the various sources of changes in costs The change in airline's costs are decomposed into components and separately measured to identzfi the effects attributable to deregulation A nwnber of other countries are now conridcring imponant changes in rhc public o w m h p and conml I See Fonyth and Hocking (1980) for mC argument that thae 1cc no diffmnces in COSD unda regulation and public ownership. Also see Davies's (1980) rcply. 2 Kirby and Albon tiad a significpnt difference of 5 per c c n~ cckvis pri!nu! but emphuizc (1985. p. 539)that thu difference n likely to be much smlllcr than cost differentials between totally dccontrdkd airlines and either regulated or publicly owned carrim

The Determinants of the Financial Performance of a Public Transport Enterprise: The Case of the Nigerian Railway Corporation, 1960-1991

“…Indeed, economic efficiency is one primary argument for public enterprises reforms. Three theories, rent-seeking, expense padding, and X-inefficiency are said to account for increased cost and allocative inefficiency in public enterprises (Formby et al 1990;Kirby and Albon 1985). The argument is that where there is a direct public sector provision, as in the case of Nigerian Railway Corporation, such enterprises are said to be inefficient for two primary reasons.…”

The Evolution of Low Cost Carriers in Australia

“…The Airlines Equipment Act of 1958 also allowed the government to control the types of aircraft imported into the country, capacity and the entry of major operators to trunk routes (Grimm, Molloy 1993). Furthermore, during this time, the competition, coordination of scheduling and domestic passenger fares was controlled by the government (Formby et al 1990). The airlines were not permitted to withdraw from services unless a regional airline would take their place.…”