result has been a number of new carriers which specialize in regional service and no-frills operations.

These carriers typically purchase older aircraft and often operate outside the industry-wide computerized

reservations system. In exchange for these inconveniences, passengers receive low fares relative to the

industry as a whole. This research examines two low fare air carriers, ValuJet and Southwest Airlines.

By investigating these air carriers, we can better understand the economic impacts of price versus

service in the airline industry as a whole, as well as, the impacts on passenger and investor confidence.

Until 1978, air transport rates were approved by the government, which meant that price was not a primary

competitive factor. Instead, airlines would compete on service and image. The airline industry was

dominated by giants (American, United, TWA) which offered nationwide and some international service, and

by regional carriers, such as Southwest, which offered short trips between airports not served by the

Deregulation of the airline industry brought about in 1978 introduced a situation in which the

history. In January 1994, a DC-9 skidded off a runway in Washington which resulted in the entire airport

In addition, the company has a 70 percent average load factor in an industry that averages 63 percent,

and overall costs are low. For example, Southwest gets 672 hours per year on average from pilots versus

other small regional carriers. It serves 31 cities primarily in the southeastern United States. The

increased passenger traffic. The recent reinstatement of the federal excise tax is not expected to have

the airline serves the Southeastern United States and competes with Continental Airlines as well as with

Perhaps due to overexpansion or to poor luck, Valujet experienced a series of mishaps in its short

371 for American Airlines pilots, and 60 percent more passenger miles per flight attendant (Levinson,

best on-time and baggage handling records in 1992 (Gold, 1993, p. 29). Each of these factors

1995 and which peaked at more than 30 dollars per share in late 1995, has plummeted to below 12 dollars

Some topics in this essay:
Cost ASM, ValuJet February, Southwest ValuJet, United TWA, Cole Pasztor, , American Airlines, Southwest Airlines, Companies Southwest, Orlando Atlanta, airline industry, low fares, passenger miles, seat miles, revenue passenger, load factor, southwest’s success, regional carriers, revenue passenger miles, low fare, 1994 1993 revenue, thorpe 1996 262, chart identifies, 1995 1994 1993, cost factors cents,