The Effects of Deregulation on the U.S. Airline Industry

Abstract

This paper investigates the financial performance of the U.S. airline industry, especially the industry's sensitivity to business cycles, since the 1978 passage of the Airline Deregulation Act. The industry's potential return to profitability through restructuring, particularly through its advocacy and pursuit of globalized markets, is explored. Altman's Z-score model, which reflects 22 financial items (obtained from the Industrial Compustat) for each airline company, is applied to illustrate the stability of the industry during the 1982-1989 period and its deterioration since 1989.