Corporate & Securities Law

R.I.P. Alfred Kahn (1917-2010)

A remembrance from David Henderson,and Kahn’s entry in the Concise Encyclopedia of Economics on Airline Deregulation.

An excerpt from the WSJ/ AP obituary:

A leading scholar on public-utility deregulation, Mr. Kahn led the move to deregulate U.S. airlines as chief of the now-defunct Civil Aeronautics Board in 1977-78. The board had to give its approval before airlines could fly specific routes or change fares.

“Historically, the board has insisted on second-guessing decisions by individual carriers to offer price reductions,” Mr. Kahn said in early 1978 as so-called “super-saver fares” swept the industry. “During the last several months we have been abandoning the paternalistic role, leaving the introduction of discount fares increasingly to the management.”

President Jimmy Carter embraced deregulation as a means of stimulating economic growth. Mr. Kahn was largely instrumental in garnering the support needed to push through the Airline Deregulation Act of 1978 ? the first thorough dismantling of a comprehensive system of government control since 1935.

“I open my mouth and a fare goes down,” he quipped to The Washington Post in 1978.

By letting airlines instead of the government decide routes and fares, Mr. Kahn is credited above anyone else with enabling a dramatic drop in airline fares and a boom in air travel over the last 30 years.

Deregulation opened the way for such carriers as People Express and JetBlue, and allowed low-cost Southwest Airlines ? which had up until then operated only within Texas, outside of CAB’s reach ? to expand nationwide.

But the move also contributed over the years to the death of such storied names as Pan American and the erosion of in-flight amenities.

“While the resulting competitive regime has been far from perfect, it has saved travelers more than $10 billion a year,” Mr. Kahn wrote in a 1998 New York Times essay.

 

Full post as published by Truth on the Market on December 28, 2010 (boomark / email).