Alfred Kahn, the Cornell University economist considered by many to be the father of airline deregulation, died yesterday at his home in Ithaca, N.Y. Kahn, who was 93, had cancer, according to an obituary on Cornell’s web site.
Kahn became the chairman of the Civil Aeronautics Board under President Jimmy Carter and led the charge to bring free market pricing to the airline industry. By then, airlines were already becoming more competitive, but Kahn believed air travel should be more affordable, and that by encouraging competition, prices would fall.
Sen. Edward Kennedy, D-Mass., later took up the call, and helped push through the Airline Deregulation Act of 1978.
Airline deregulation, of course, is often cited for many of today’s flying hassles – overcrowded planes, lousy service, few amenities. But Kahn’s goal of making air travel available for everyone was achieved.
“The purpose was to bring it within the reach of people with limited income,” he told me in 2003.
Kahn estimated that deregulation brought $20 billion worth of benefits to consumers. As for the poor service, frequent bankruptcy of carriers and other problems that have pervaded the industry, Kahn was unapologetic.
“It’s given people choices of low-quality services at low prices,” he said. “We did not suspect that [that industry] would cease to be subject to the business cycle. Some people lost a lot of money — well, that’s got nothing to do with it.”
The airline business remains something of a competitive anomaly. Unlike many other industries, bankrupt competitors tend to thrive under court protection, and often set the pricing ceiling for healthier carriers, dragging down profits for all carriers.
The result has been relentless cost-cutting that has shed thousands of jobs and left airlines with so little capital that they’ve been slow to adopt innovations that would make them more efficient.
Kahn’s efforts to bring competition to commercial aviation drew the ire of airline executives at the time, who accused him of trying to ruin the business. Kahn famously admitted he couldn’t tell one type of aircraft from another, saying he saw all airplanes as “marginal costs with wings.”
The industry’s persistent problem with competition, Kahn noted, wasn’t the point of bringing airlines into the free market.
“All I predicted was if you let them compete, they’ll find a way to fill those empty seats, increase productivity, make their route structures more efficient,” he said. “In that sense, they have succeeded tremendously.”