From his office window, Thomas W. Horton, in his fifth month as CEO of American Airlines, can see in the distance the Manhattan-size footprint of Dallas-Fort Worth airport, where American has 85 percent market share; it also has 68 percent in Miami, gateway to South America's booming market. A few miles from here, however, sits one of the reasons why, nevertheless, his company recently entered bankruptcy — the corporate headquarters of Southwest Airlines.
Southwest, the most successful of the "low cost" carriers that proliferated after the 1978 deregulation of the industry, has been profitable for 39 consecutive years, while the rest of the industry was losing $60 billion between deregulation and 2009. Southwest, JetBlue and the others have 30 percent of the domestic market, up from 10 percent in 1999. The "two tier" airline industry is, however, becoming a thing of the past. All carriers are going to have low costs because of what Horton calls "fear-based discipline," aka competition.
In the last three decades there have been 192 airline bankruptcies. Not coincidentally, fares, adjusted for inflation, are 18 percent lower than in 2000. Forty years ago, a majority of Americans had never taken an airplane trip. Now everyone is more free than ever to move about the country, air travel having been democratized by liberating it from government.