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Consumer views of the need for government intervention in the airline market.

Inflamed public opinion--sparked by an accident or scandal and fanned by media coverage--frequently stimulates enactment of consumer policies (Mayer 1991). The deregulation of the airline industry in the United States is an exception to this pattern, however. Rather than coming in reaction to public outcry, airline deregulation was a response to the prolonged efforts of "a very unusual set of actors in the public arena: economists, political scientists, legal scholars, and similar purveyors of ideas" (Weidenbaum 1987).

Given the public's limited role in putting airline deregulation on the policy agenda, it is perhaps not surprising that evaluations of airline deregulation have also typically failed to factor in public opinion. Instead, these evaluations have been conducted in terms of the quantifiable objective variables that experts handle best--like market concentration ratios, fares, and accident rates. Even if these expert assessments were in agreement about the need for renewed government intervention in this market, analyses of public opinion can still make an important contribution to the current policy debate regarding the airline industry.

Airline deregulation was promoted on the basis of its alleged benefits to consumers. As such, consumers' current perceptions of the success or failure of airline deregulation should play an important role in any reregulation debate. Yet, knowledge about the public's views of airline deregulation is shallow, relying exclusively on univariate or bivariate analyses of a few questions contained in national opinion polls.

In this exploratory study, consumers' opinions regarding the need for renewed government intervention in the airline industry are presented and analyzed. Particular attention is given to how respondent characteristics as well as aspects of the local airline market (i.e., airport concentration level and the extent of direct flight service) influence consumers' opinions. More broadly, the study aims to make public opinion a more important input to the current debate about the future of airline deregulation.

LITERATURE REVIEW

For the most part, economic studies of airline deregulation have examined its objective costs and benefits and attempted to identify changes in the price and quality of service attributable to deregulation. In contrast, public opinion studies have focused on consumers' perceptions of the costs and benefits associated with airline deregulation. Because the results from the two types of studies are presumably related, both should be reviewed before undertaking an in-depth study of public opinion. The economic studies are reviewed first, followed by the less numerous public opinion studies.

Economic Studies

The Airline Deregulation Act of 1978 precipitated the phased withdrawal of U.S. government regulation so that, by 1983, airlines were free to decide which routes to serve and what prices to charge. Early economic studies that appeared in the mid-1980s generally concluded that airline deregulation was working well. That is, it had increased competition and improved consumer welfare (Bailey, Graham, and Kaplan 1986; Moore 1986; Morrison and Winston 1986; Trapani and Olson 1982).

Even as the 1980s came to a close, studies continued to appear documenting the net benefits of airline deregulation. A Federal Trade Commission study found that average prices fell, although mostly on long distance routes and in large city markets (Ogur, Wagner, and Vita 1988). A study by the U.S. Department of Transportation (1990a) also reported that travelers had benefited from deregulation by receiving more service at a lower cost. The Air Transportation Association (1989) concluded that the degree of competition in the airline industry had increased substantially since airline deregulation had begun. Surveying the evidence, Alfred Kahn (1990), the architect of airline deregulation, affirmed the continued success of deregulation despite the U.S. government's failure to monitor airline mergers adequately.

The scientific support for airline deregulation was not unanimous, however. By the end of the 1980s, some had begun to question whether consumer welfare was being well served in an increasingly oligopolistic market (Bailey and Williams 1988; Karr and McQueen 1989; McGinley 1989; Mead 1989). An Economic Policy Institute study released in 1990 claimed that routes had become more circuitous, service had deteriorated in quality, and the margin of safety had narrowed under deregulation (Dempsey 1990). A second study found deregulation's effect on consumer welfare was mixed (Joesch and Zick 1991), with the net impact hinging on the concentration level of the origin and destination airports and the time frame analyzed.

Evidence most commonly used by experts to indict airline deregulation was rising market concentration. Researchers and politicians alike cited the rash of airline mergers in the 1980s and resulting increase in market concentration, especially in some hub cities. Specifically, while 14 carriers accounted for 90 percent of domestic commercial air travel in 1984, by the end of 1991 that number had dropped to seven carriers, and of those seven, two have gone into various phases of bankruptcy. At the local market level, no hub airport in 1984 had one airline accounting for more than 75 percent of the domestic traffic; however, by 1988, there were six such airports (McGinley 1989). Advocates of deregulation countered that increased market concentration reflected economies of scale and that market performance (i.e., prices and quality) was more relevant than market structure for judging the success or failure of deregulation (Kahn 1990).

Trends in air fares are used as an indicator of the deregulated airline market's performance. Virtually all studies have agreed that fares rose less steeply (and for many origin-destination pairs declined in real terms) during the deregulated 1980s than they did prior to deregulation. However, some studies have attributed the moderation of fares to factors other than deregulation, such as technological improvements (set in motion prior to deregulation) and decreases in fuel prices (Dempsey 1990).

Some studies have tried to link the growth in market concentration at many of the larger airports to changes in air fares. The hub and spoke system that emerged in the wake of deregulation increased concentration levels and created barriers to entry in many local markets (Borenstein 1989; Congressional Budget Office 1988), Such barriers are likely to translate into higher air fares for consumers living in those markets. In support of this contention, one recent General Accounting Office study found when one or two airlines dominated the traffic at a particular airport, these airlines also typically had higher "yields" (air fares expressed in cents per mile) than their non-dominant competitors (Mead 1989).

Opinion Studies

The mass media is responsible for what little is known about public opinion regarding airline deregulation. The media has carried anecdotal evidence of consumer dissatisfaction with crowded planes, flight delays and cancellations, rising fares, and near-collisions. In addition, the mass media has reported on government efforts to compile such complaints (Dahl 1990). Most important for the purposes of this paper, every major player in the broadcast (i.e., ABC, CBS, NBC, CNN) and print (i.e., Associated Press, The Wall Street Journal, The New York Times, The Washington Post, Business Week, TIME) industries has sponsored or cosponsored a poll to gauge public sentiment about the airline industry and the perceived success/failure of deregulation.

Throughout most of the 1980s, the media-sponsored polls suggested that the public felt that airline deregulation's effects had been salutary, except with respect to airline safety (ABC News/Washington Post 1987; Harris Poll 1988; Roper Poll 1986). By the end of the decade, public opinion soured regarding the nonsafety effects of airline deregulation as well. A 1989 poll conducted for The Wall Street Journal reported that 43 percent of a national sample named the airline industry (from a list of 22 industries) as the one in which they had the least confidence. In addition, a third of those polled indicated their esteem for airlines had fallen "dramatically" during the last five years (Winans and Dahl 1989).

When asked what actions the government should take concerning deregulation, members of the general public have consistently supported more action to insure airline safety. But there has been more ambivalence regarding renewed government intervention in the economic aspects of the industry. A 1986 Roper Poll reported that about half of the respondents thought there should be more controls on safety, but only four percent wanted more controls on prices and only two percent thought there should be more control of the quality of service. Similarly, a 1987 CBS News/New York Times Poll reported that while 38 percent of the respondents thought the government should be responsible for regulating airline prices and schedules, 54 percent thought the government should not.

In sum, results from opinion polls indicate that people separate deregulation's direct effects on competition and prices from its (perceived) indirect effects on safety. Until recently, the general public had approved of deregulation's effect on prices and service and did not see the need for renewed government regulation. With respect to safety, in contrast, survey respondents have consistently reported a lack of confidence in the airlines, favoring an expanded government role.

From a methodological point of view, media-sponsored opinion polls have sought breadth rather than depth. That is, the strength of these polls lies in their use of representative national samples, but respondents are typically asked only a few, general questions. Results of these polls are reported in aggregate terms without attention to individual differences by income or flight experience. Nor have there been any attempts to relate public opinions to local market conditions, even though economic studies strongly imply consumer opinions of deregulation should reflect trends in local market concentration levels, prices, and service quality. This study integrates economic studies and public opinion research by examining consumer opinion (and its correlates) in three cities in the western United States that vary in terms of level and kind of concentration in their local airline markets.

METHODS

Research Design and Data Collection

The framework underlying this exploratory study is one in which public opinion about the need for renewed government intervention in the airline market is posited to be a function of (a) nature of airline competition in the respondent's local market and (b) individual's experiences and characteristics. Under deregulation, consumers living near hub airports have typically benefited from an expansion of direct service. Gradually, these consumers may have also experienced fare increases because of rising local market concentration associated with most hub airport operations. In contrast, consumers living near nonhub airports are likely to have seen air travel become more circuitous; but at the same time, carrier competition may have kept fares at nonhub airports relatively stable. Regardless of the exact effects, these differing patterns suggest it is important to draw a sample of consumers from both hub and nonhub areas and to ask them separate questions regarding the need for government involvement in setting routes and fares.

Of course, consumers' opinions regarding the need for fare or route regulation are likely to vary with individual characteristics. Thus, in an exploratory study it is important to collect data regarding respondents' sociodemographic characteristics and flight experiences. In addition, respondents' general assessments of recent trends in the airline market (e.g., trends in prices and safety) may inform an analysis of their opinions regarding the need for government route or fare regulation.

The data used to investigate consumer opinion regarding renewed government intervention come from a survey of adults 18 years or older living in three different local airline markets in the western United States. Three major metropolitan counties were chosen because they represent diverse local airline market conditions yet are reasonably similar in population, distance to other major metropolitan areas, and seasonal weather characteristics. While not including the entire area served by a given metropolitan airport, these counties contain a large proportion of the relevant populations.

County A is serviced by a relatively new hub airport where one airline accounted for 80 percent of the 5.2 million passenger departures in 1989 (Federal Aviation Administration 1989). County B is served by a long-standing hub airport where two airlines accounted for 85 percent of the 12.3 million passenger departures in 1989 (FAA 1989). County C is served by an airport where no one carrier accounted for more than 25 percent of the 3.0 million departing passengers in 1989 (FAA 1989). As such, the airport in County C is not considered a hub for any major airline. Descriptive information about the three markets appears in Table 1.

A university survey research center conducted telephone interviews with 881 randomly selected residents of County A, 399 of County B, and 405 of County C. The interviews were conducted in April and May 1990 in County A and from early September to early October in Counties B and C. The survey cooperation rates were 78 percent for County A and 76 percent for Counties B and C.(1)

TABULAR DATA OMITTED

To correct for disproportionate sampling and the possibility of differentiated nonresponse across the three sites, the data were weighted. Normalized weights have been constructed based on sample information and 1990 U.S. Census information regarding age, sex, and ethnic composition of each county's adult population. In the analyses that follow, the weighted data allow the results to be generalized to the adult population living in these three counties.

Measures

Survey participants were told that beginning in 1978 government gradually gave up its power to set airline fares and routes. With this information as a preface, the interviewer then asked two questions. The first question was "|d~o you think that the government should get more involved in setting airline fares?" The second question was "|d~o you think the federal government should get more involved in setting airline routes?"

These two questions were devised to measure the perceived need for government intervention in the airline market. The wording of the two questions was purposefully designed to be general, avoiding any mention of specific methods of government intervention. The answers to these two questions are used in the current study to gauge consumers' opinions regarding the need for renewed economic regulation of the airline industry.

The individual measures used in the analysis are limited to those that could be asked of all respondents, regardless of whether they had flown in the recent past. It is assumed that even people who had not flown recently would have perceptions of trends in airline prices and safety as well as opinions on the need for renewed government intervention. For example, respondents may have chosen not to fly because they believe prices are too high and/or safety precautions are inadequate. Nor does a person need to have taken a flight to have information about the airline industry; nonflyers can acquire information about local air travel issues from newspapers, television, radio, and social conversations. In contrast, changes in travel time and convenience are likely to be less visible to nonflyers and as a consequence, questions about these trends were not asked in the survey even though they are potentially relevant factors and their omission could potentially bias the results.

In addition to number of times, if any, the respondent had flown out of the airport in his/her county during the previous 12 months,(2) a variety of other individual variables are measured that may affect opinions regarding the need for reregulation. One set of variables consists of socioeconomic and demographic characteristics: household income, educational attainment, and political affiliation of the respondent. A second set of variables measures perceptions of trends over the last three years in airline prices (for travelers with flexible and inflexible schedules) and airline safety.

RESULTS

Descriptive Results

The analyses presented in this section are based on the 1,685 respondents who provided complete information on all relevant survey questions. The weighted data are typical of individuals 18 years and older living in these three counties. In the three-county sample, 58 percent of respondents are female. Respondents average 40 years of age, typically have 13.7 years of schooling, and have a mean household income of $27,469. Thirty-one percent of the respondents identify themselves as Democrats, 34 percent Republicans, and 35 percent claim no party affiliation (i.e., independents). During the previous 12 months, 48 percent of the respondents had flown at least once on a regularly

scheduled commercial airline. Of those who had flown, approximately two-thirds had taken only one or two flights out of their respective airports.

Table 2 presents frequency distributions on the perception variables by county of residence. The table reveals little diversity in perceptions across the three counties with respect to airline safety (p |is less than~ .55). Overall, 22.1 percent believe that safety has gotten better over the past three years, while 37.8 percent say it is about the same, and 32.7 percent believe that safety has declined. Only 7.3 percent of the respondents in all three counties said they did not have enough knowledge to comment on safety trends.

In contrast, frequencies reveal significant diversity in perceptions across the three counties regarding trends in air fares. Compared to County A respondents, those in Counties B and C are somewhat TABULAR DATA OMITTED more likely to believe that during the past three years fares have risen for flexible and inflexible travelers (flexible p |is less than~ .01; inflexible p |is less than~ .05). In contrast, respondents from County A are more likely to report they did not know what had happened to air fares during this three-year period.

This difference in perceptions of trends in fares is especially interesting in light of actual fare data. The U.S. Department of Transportation's Passenger Origin and Destination Survey (1990b) reveals fares for travel originating at the airport in County C hardly changed in real terms between 1987 and 1990. In contrast, fares for travel originating at both County A and County B increased in real terms by almost 20 percent during this period. Thus, perceptions about fares among residents of County B match actual local market conditions most closely.

Regardless of the county of residence, the most common perception among respondents is that fares worsened for both flexible and inflexible travelers during the past three years (50.9 percent and 64.4 percent of all respondents, respectively). Few respondents think fares for either group got better or even remained the same. Indeed, for the question regarding fares for inflexible travelers, respondents who are unsure of what had happened to fares outnumber the sum of those who think fares have remained the same and those who think fares have gotten better.

While many respondents are uncertain about airline fare trends, they are much more certain in their opinions regarding the need for government intervention in fares or routes. A majority of respondents across all three counties are opposed to increased government involvement in both airline fares (53.4 percent) and airline routes (60.0 percent). Only 38.1 percent of respondents indicate they think government should get more involved in setting of airline fares and an even smaller percentage (30.9) believe government should get more involved in setting airline routes.

If public views of airline deregulation are weakly held or based on more general views about the appropriateness of government intervention in the marketplace, one might expect individuals who oppose fare intervention would also oppose airline route intervention. Cross-tabulations of the two government intervention questions (not shown here) reveal over 29 percent of all respondents fall in the off-diagonal cells--that is, their preferences regarding government involvement in setting fares are different from their preferences regarding government involvement in setting routes. If respondents have differing opinions, most often they favor intervention with fares but not routes (226 people representing approximately 13.4 percent of all respondents). Support for renewed regulation of routes coupled with renewed regulation of fares is less common (125 people representing approximately 7.4 percent of all respondents). The remaining 8.2 percent of off-diagonal respondents answered "don't know" to one of the two "government needs to get involved" questions.

Given objective data showing differences in price trends in the three airports studied, one might expect differences by county of residence in opinion regarding renewed government involvement with fares. But, despite the increase in real air fares experienced by residents of Counties A and B, respondents from these counties are just as likely as County C residents to oppose government regulation of air fares (p |is less than~ .59).

Objective differences among the three markets are better reflected in differences by county regarding the need for government involvement in setting routes, with residents of County A being more likely to oppose route regulation (63.6 percent) than residents of County B (59.5 percent) or County C (53.3 percent). These statistically significant differences (p |is less than~ .01) are not surprising. Respondents living near recently established hub airports (County A) and longer-standing hubs (County B) have seen an expansion of direct route service since deregulation went into effect. If these consumers associate route deregulation with an increase in direct service (or any other service benefits), then it is not surprising that they are more likely than respondents living in County C to oppose renewed government involvement in setting of airline routes.

Multivariate Results

To identify the factors that may influence public opinion regarding government intervention in the airline industry, two multivariate analyses are undertaken. The first focuses on opinions regarding government involvement with fares while the second examines opinions regarding government involvement with routes. In each equation the independent variables include measures of respondent's socioeconomic characteristics (i.e., sex, education level, political party affiliation, and total household income), flight experience (i.e., number of flights taken during the past 12 months), and his/her assessment of price and safety trends in the airline market. Measures of perceived price and safety trends have been transformed into a series of dummy variables. The omitted category in each of these series is composed of those respondents who report thinking that prices (safety) have remained the same or become cheaper (improved) during the past three years. The omitted category for the county dummy variable is County A.

There are several ways in which the dependent variables in these multivariate analyses could be coded. Under one possible coding scheme, only those respondents who answered "yes" or "no" to the government involvement questions would be analyzed. If this were done, information on the 12.9 percent of survey respondents (217 individuals) who answered "don't know" to either one or both of the questions would be lost. To avoid eliminating such a potentially important subset of the sample, a coding scheme is adopted where a respondent answering "no" is coded as a "0," someone answering "don't know" is coded as a "1," and someone answering "yes" is coded as a "2." This arrangement assumes that "don't know" respondents fall into a middle ground somewhere between those respondents who oppose government intervention and those respondents who favor it.

The ordinal dependent variables in the price and route equations violate the assumptions needed to use ordinary least squares regression analysis (Blalock 1979). Two limited dependent variable estimation techniques, discriminant analysis and logistic regression, are often used in research that deals with ordinal dependent variables. For this investigation, logistic regression is selected over discriminant analysis because it requires fewer estimating assumptions (Press and Wilson 1978). Specifically, given these three-point opinion scales, it is most appropriate to estimate each equation using an ordered logit program (Maddala 1983).(3)

Estimates of the ordered logit equations appear in Table 3. As one examines the coefficients, note that an ordered logit coefficient is interpreted as the change in the log of the odds ratio of moving from one level to the next (e.g., from saying "no" the government should not get involved in airline route regulation again to saying "I don't TABULAR DATA OMITTED know"), given a one unit change in an independent variable, holding other independent variables in the equation constant (McKelvey and Zavoina 1975).

As was the case in the descriptive analyses, County A respondents are significantly less inclined to favor government intervention in setting routes than residents of Counties B or C. This finding may reflect some of the unique aspects of County A. During initial years of deregulation, a major airline made County A's airport one of its new hubs, markedly increasing route service between this metropolitan area and other cities. Being a new hub may also include other factors (e.g., terminal modernization) associated with the presence of a dominant carrier. In the mid-1980s, this airline was bought by another major carrier that continued the expansion of the number of "spoke" cities serviced by County A's "hub" airport. The residents of County A have seen a considerable increase in the number of destination cities serviced by direct flights from their airport since deregulation was initiated in the late 1970s. Thus, substantial opposition to the reregulation of routes voiced by survey respondents may be attributable to their perception that any reregulation of airline routes would lead to a reduction in direct flight service at their airport.

Turning from the topic of routes to that of fares, County B residents are significantly more likely to support government intervention in setting prices compared to County A residents, ceteris paribus. The explanation may lie in the fact that County B is the site of a longstanding hub airport whereas County A is a new hub. Like County A's airport, fares in and out of County B's airport rose during the 1987-1990 period, but unlike County A, passengers based in County B saw few new compensating improvements in the extent of direct flight service.

Results in Table 2 also indicate three sociodemographic variables--household income, political party affiliation, and gender--are related to opinions regarding government involvement in the airline industry. Respondents from higher income households are less likely to favor government intervention in setting airline fares, holding other factors constant, but household income does not appear to influence a respondent's opinion regarding route intervention. Respondents who identify themselves as Democrats are more likely to favor government involvement in both route and fare setting than are Republicans (omitted dummy variable category). There are no significant differences of opinion between independents and Republicans. Finally, women are more likely to favor government involvement in setting fares than are men, but there is no gender difference in support for setting routes. Results for political affiliation are in keeping with the notion that people who are generally supportive of government intervention in the economy will be receptive to the idea of government intervention in the airline industry, but an explanation for greater support for government involvement among women and lower income people requires further study.

Public opinion regarding renewed government involvement in setting airline fares and routes does not vary with respondent's education level or flight frequency. The lack of association between flight frequency and one's opinion about government intervention is particularly interesting. If deregulation has led to a categorical expansion of routes and a general reduction in fares, then frequent flyers should have a stronger vested interest in maintaining the deregulated market than those individuals who fly infrequently. If deregulation has led to a substantial decline in routes serviced and a general increase in fares, then frequent flyers should be more likely than infrequent flyers to voice support for government intervention in this market. Either way, a relationship between flight frequency and opinion regarding government intervention would be expected. The absence of such a relationship may indicate that flyers' experiences with fares and routing vary considerably from trip to trip or there are distinct subsets of flyers (e.g., business and pleasure travelers) whose opinions counterbalance each other.

Perceptions about recent pricing trends for the flexible traveler are a strong predictor of public opinion regarding government intervention in the current analysis. Flexible travelers may be thought of as "meeting the airlines half way" by purchasing tickets well in advance, staying over a Saturday night, and/or traveling only on certain days/routes. People who believe fares have become more expensive for flexible travelers are significantly more likely to favor government re-intervention in setting of fares than are people who believe that fares have remained the same or gotten cheaper for flexible travelers during the past three years, ceteris paribus. Less expected is the fact that people who believe fares have become more expensive for flexible travelers are also more likely to favor renewed intervention in routes. This finding may suggest that dissatisfaction with price trends outweighs any perceived improvement in service availability and promotes a "turn-back-the-clock" attitude toward airline regulation.

In contrast, the relationship between perceptions about recent pricing trends for inflexible travelers and opinions regarding regulation is, surprisingly, negative for price regulation and not statistically significant in the route equation.(4) It appears that the respondents are generally unsympathetic to the plight of the inflexible flyer. Inflexible flyers may be viewed by respondents as people who are unwilling to adjust their flight schedules to reduce an air fare or people whose travel is paid for by employers. The perception that fares are rising for these inflexible flyers does not lead respondents to believe that government intervention is called for in the setting of prices or routes.

Finally, an examination of the coefficients associated with the safety dummy variables shows respondents who believe safety has declined during the past three years are more likely to support intervention in both fares and routes than are respondents who believe safety has remained the same or improved, ceteris paribus. Similarly, those who report they are unsure about safety trends are also more likely to support government intervention.

The relationship between negative perceptions about airline safety trends and support for renewed intervention in the airline industry is especially important in light of two facts. First, while the 1978 Airline Deregulation Act phased out government controls on commercial air fares and routes, it did not alter the government's role in regulation of airline safety. Second, the airline accident rate has shown a general decline since the early 1980s when the phasing in of economic deregulation was completed (McKenzie 1991; Morrison and Winston 1988; Winans and Dahl 1989). Thus, there is neither a statutory nor an evidentiary link between safety and route/fare deregulation in the commercial airline market.(5) Nevertheless, those respondents who (incorrectly) perceive air safety to be on the decline are more likely to be favorably disposed to government's renewed involvement in this industry. As is the case regarding perceptions of rising fares, the belief that safety has deteriorated under deregulation may outweigh any perceived price/service improvements and lend support to renewed government intervention.

DISCUSSION AND CONCLUSIONS

This study has several design limitations that should be kept in mind when reflecting on the findings. For example, the three counties studied are serviced by different types of airports--a single-carrier hub, a two-carrier hub, and a nonhub. As such, there is no way of knowing if these counties are indeed representative of other counties with similar types of airports. In addition, there was a four-month gap between collection of data in County A and in Counties B and C, and thus comparisons across the three counties must be tempered by the knowledge that intervening historical events may have contributed to observed differences.

Given the limits of this three-county study, what can be said about public opinion about government intervention in the airline market? In particular, to what degree do perceptions and opinions vary by local market conditions? To what extent do consumers hold global versus multifaceted views of airline deregulation? How interested are consumers in renewed government intervention in this market?

First, opinions about industry performance and the need for government intervention are clearly related to perceived and actual conditions. Statistically significant bivariate relationships hold between perceptions about price trends--for both travelers with flexible and inflexible schedules--and county of residence. Multivariate analyses also show the importance of perceived conditions for opinions about government involvement in setting of routes and fares. Hence, future public opinion studies of airline deregulation should be more sensitive to variations in level and kind of industry concentration at local airports.

Second, the structure of consumer perceptions about the airline market appears to be complex. Perceptions about price trends for travelers with flexible and inflexible schedules are separable, as shown by differences in frequency distributions and performance in the multivariate analyses. Preference for government fare intervention is positively associated with the perception of price increases for flyers with flexible schedules, but negatively associated with the perception of price increases for flyers with inflexible schedules. This pattern of results suggests consumers understand and approve of price discrimination. Similarly, preferences for price intervention and for route intervention do not closely correspond. A sizeable proportion of respondents favored government involvement of one type but not the other.

Despite these distinctions within the public mind, there are also two intriguing linkages between perceptions and opinions regarding government intervention. One is the fact that people who believe fares have become more expensive for flexible travelers are more likely to favor government involvement in assigning routes, not just setting prices. The other is the positive association between the perception that safety has declined during the past three years and support for renewed government involvement in setting both fares and routes, even though safety is not an explicit element in airline deregulation. The latter finding suggests that some members of the public perceive that safety has been compromised in the process of stimulating price and route competition in the industry. Together these two relationships might indicate people who perceive deterioration in prices or safety are more likely to support full (i.e., both price and route) rather than partial forms of reregulation. It is not clear from these findings, however, that people would necessarily support the exact form of airline regulation prevailing prior to deregulation.

Overall, it is important to recognize that the vast majority of consumers, regardless of their local market characteristics, favor neither government intervention in setting of fares nor in determining routes. In contrast, a large majority of the sample (60.7 percent) believe federal regulations regarding airline safety are not strict enough (data not reported in tables). Only 1.9 percent of respondents feel that government safety regulation is too strict. While respondents who believe safety has deteriorated with deregulation are more inclined to favor renewed government regulation, the overall pattern of results suggests that people differentially assess the various aspects of airline deregulation.

Although consumers do not generally favor route or fare intervention, of the two, they are less inclined to favor route intervention. This is especially true for County A residents. Studies find that fares in and out of County A have risen faster than at other hub airports, although only slightly so (Kurth and Company 1989). At the same time that fares may have risen due to County A's hub status, consumers in County A have clearly gained in terms of choices available to them. The airport's hub designation means more flights to more cities than would likely have been the case if County A's airport had remained a spoke in the air transportation system. Thus, price issues aside, consumers in County A can be considered beneficiaries of deregulation and should therefore be relatively less receptive to renewed route intervention.

To the extent the respondents in this study are representative of other people served by a hub where one airline dominates, a hub where two carriers dominate, and an airport that is not a hub for any airline, it appears that the majority of the nation's consumers still support airline deregulation. Consumers would like to see increased government involvement in airline safety, but only a minority appear eager to return to the system in which government controls prices and routes.

A primary assumption underlying this paper is that public opinion should make a contribution to the current policy debate regarding the airline industry. Policymakers are often in a quandary regarding whether to respond to reality, as defined by empirical economic studies or to respond to citizens' perceptions of reality as determined in surveys as the one reported here. Although policymakers usually prefer to make decisions based on economic data, they must be cognizant of public opinion that may either support or not support a policy under consideration. Objective and public perception in this study were found to be in agreement, in others they were not. When there is congruence between fact and perception the policymaker's task is much simpler; however, when there is dysfunction (e.g., perceptions and reality of airline safety), the policymaker must decide whether policy will be formulated in spite of opinion, whether it will perhaps include an attempt to educate the citizen to the reality of the situation, or if policy will be expediently bent to reflect opinion. In any event, the policymaker must first be aware of public perceptions of and opinions about issues at hand.

1 In conducting this telephone survey, the survey research center made nine attempts to contact randomly selected numbers using an automatic scheduling program. These attempts were randomly done across seven days of the week between the hours of 5 and 9 p.m. Mondays through Fridays, 10 a.m. to 9 p.m. on Saturdays, and noon to 9 p.m. on Sundays. This procedure minimizes the potential bias associated with more frequent absences from home of people who fly often.

2 Intuitively, one would believe people might respond differently to questions regarding fares depending on whether they paid for their airline ticket or some other party did (e.g. employer). Those who had someone else pay for the ticket might favor a return to regulation as deregulation not only brought about a decline in fares to which they would be somewhat insensitive, but also brought about things to which they would be sensitive, such as crowded planes and fewer amenities. Analyses of the data (not reported in this paper) revealed whether the respondent paid for the ticket or someone else did had no influence on responses to questions regarding the need for government intervention.

3 It can be argued that opinions regarding renewed government intervention in fares and opinions regarding renewed government intervention in routes are simultaneously determined. If this is true, then the two equations should be estimated simultaneously.

4 While the frequency distributions on these two measures of attitudes about airline fares are quite similar, their simple correlation is only .18, suggesting that those respondents who believe fares have increased (decreased) for the flexible travelers are not generally the same respondents who believe fares have increased (decreased) for the inflexible traveler.

5 The survey question regarding safety did not define safety by specific categories, e.g., number of accidents, fatalities, near midair collisions. Although the number of accidents and fatalities has had a downward trend since deregulation, reported near misses showed an upward trend from 1978 to 1987 and then a sharp downward trend to 1990 when the figures were last reported (McKenzie 1991). Because the media is more likely to report negative aspects of safety as opposed to positive, the public may have been more aware of the reported rise in near misses than they were of the subsequent decline.

REFERENCES

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Air Transportation Association (1989), "Hub Operations: Analysis of Airline Hub and Spoke Systems Since Deregulation," unpublished report (May).

Bailey, Elizabeth, David R. Graham, and Daniel P. Kaplan (1986), Deregulating the Airlines, Cambridge, MA: MIT Press.

Bailey, Elizabeth and Jeffery R. Williams (1988), "Sources of Economic Rent in the Deregulated Airline Industry," Journal of Law and Economics, 31(April): 173-202.

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John R. Burton and Cathleen D. Zick are Associate Professors and Robert N. Mayer is Professor, Department of Family and Consumer Studies, University of Utah, Salt Lake City.

Funding from the Department of Family and Consumer Studies and the University of Utah Research Committee supported the collection of the data analyzed here. Two anonymous reviewers gave helpful comments on an earlier version of this paper. Ken R. Smith and Lois Haggard gave valuable input into the construction of the survey instrument used in data collection.
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Author:Burton, John R.; Zick, Cathleen D.; Mayer, Robert N.
Publication:Journal of Consumer Affairs
Date:Jun 22, 1993
Words:7260
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