The Airline Revolution: Economic analysis of airline performance and public policy

When starting new airlines in response to government deregulation, entrepreneurs in the U.S. and Europe reduced some traditional service qualities (to reduce costs), concentrated on non-stop services between city pairs not already so connected, improved on-time performance, and offered low fares to win leisure travelers from the incumbents and to encourage more travel.

In recent developments, some of the new airlines have offered optional extras (at higher fares) to attract business traveler...