The consolidation of the domestic airline industry continued as some of the larger airlines ran into financial difficulties at the end of the decade, when the prolonged economic expansion faltered and domestic growth in air travel reversed into a decline. Bankrupt airlines sold off parts of their systems to the larger airlines and eventually stopped operations. By 1991 the 23 airlines operating at the start of deregulation had been reduced to 6 financially viable airlines (United, American, Delta, USAir, Northwest, and Southwest). The top three domestic U.S. airlines have transformed themselves into major international airlines.
There also has been a remarkable change in the makeup of the very small commuter or regional airlines. Before deregulation there were more than 250 such airlines, using 7- to 18-seat piston and turboprop aircraft that supplied air service from their very small cities to the nearest major airport. These privately owned, fiercely independent small entrepreneurs had a virtual monopoly on local services.
When deregulation allowed larger airlines to abandon money-losing, small-traffic markets, the manufacturers in several foreign nations foresaw a large potential U.S. market for short-haul turboprop transport aircraft of seating capacity from 30 to 50 seats. The resulting competition involved creative financing of the sales and leasing of these larger commuter aircraft to the more ambitious operators. Marketing alliances were forged between regional commuter and major airlines, and some major airlines bought commuter lines outright, in order to provide feeder traffic to hub airports.
All of these regional airlines are now subject to the direction of a larger airline in establishing their schedules and have aircraft owned or financed by that airline and painted in its colors. To add to the confusion, schedules suggest that flights are operated by the larger airline.
The future development of the U.S. domestic airline industry is not clear. Instead of public hearings on fare levels and structures held by the CAB, the larger domestic airlines, in a manner characteristic of oligopolistic industries, now conduct an industry debate in the national media and undertake punishing short-term reprisals to initiatives taken by their competitors that they consider undesirable. The issues of reregulation of the industry and of allowing foreign ownership of U.S. airlines have arisen in Congress. It is no longer inconceivable that cabotage may be deemed necessary to maintain real competition in domestic markets. Thus as the industry moves into the 21st century, it can be expected to remain an enterprise that is dynamic, interesting, and full of surprises.
