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Pan Am and the Economics of Hot Flight Attendants

By Tom W. Bell and Glen Whitman

A quick break from the economics of Aesop, so I can talk about the economics of ABC?s Pan Am before it gets canceled. Not that I want it to get canceled; I watched the pilot and liked it. But the Nielsen numbers say I should speak now while it?s still topical...

For an economist, the most fascinating aspect of Pan Am is the highly attractive flight attendants -- or rather, stewardesses, since the show is set in the early 1960s. If you?re young enough, you might think that?s just TV. But I?m just old enough to remember flying in the 1970s, and I recall stewardesses who really were, in fact, hot. Okay, I was too young to understand the concept of ?hot? -- but I was definitely aware that I was being attended by some very pretty young women.

Not so anymore. Flight attendants aren?t necessarily unattractive now, but they?re no more fetching than people in any other service profession that doesn?t get tips. And what?s changed? In a word, deregulation.

Prior to airline deregulation, which was passed in 1978 and completed over the next few years, airfares had been set by the Civil Aeronautics Board (CAB). For many routes, those airfares were simply too high. As predicted by a simple supply-and-demand model, airlines were willing to offer more flights at these high prices than customers were willing to buy. Under normal market conditions, that would lead to falling prices. But since the airlines legally could not compete on price, they competed on quality instead. They offered better service, better food, and... wait for it... more attractive stewardesses.

When deregulation came along, however, it became apparent that as much as male customers might have enjoyed the eye candy, they weren?t willing to pay for it. Higher quality might seem like a good thing, but it?s really only good if the benefit exceeds the cost. More attractive staff can command higher wages. The airlines could have continued to pay them, if the higher quality had attracted more customers. But as it turns out, most people just wanted to get where they were going, fast and cheap. Deregulation fueled a democratization of air travel, making what once was a luxury item available to nearly everyone. The number of people who fly at least once a year has more than doubled since 1978, while the population has grown by about 40%. These new customers have flocked to the airlines with no-frills or low-frills service, a trend that continues to this day (JetBlue, anyone?).

And y?know what? That?s a good thing, yet another efficiency gain from deregulation. There are plenty of other ways to see attractive women.

Full post as published by Agoraphilia on October 11, 2011 (boomark / email).