Post-deregulation Passenger Selection of US Airports

Abstract

This longitudinal study examines passenger boarding (O&D) data from a sample of 306 airports during
the post-deregulation period, 1979-2014. Deregulation of the airline industry eliminated barriers to
compete for US markets, resulting in a surge of air service entrants and new consumers, as well as the
creation of a new regulatory template that would expand air service, worldwide. Price elasticity of
demand and its conventions of price discrimination, price dispersion, substitution effect, and income
effect explain the rationale and maneuvering of major airlines to reduce ticket prices to contest entrant
low cost carriers. While rigorous competition during the study period nearly tripled the number of total
annual US passengers, airports did not share equally in the benefits. The nation’s largest airports enjoy
an annual growth rate that is more than three times greater than the smallest “nonhub” airports. This
36-year comparative analysis of passenger trends provides actual measurements and observations of
the evolving pattern of traveler migration to the originating and destination airports of city pairs.