Question

Deregulation, like all changes in government policy, always has pluses and minuses. What do you think some of the minuses might be for airline deregulation? Please be thourough and detailed in your explanation.

Answer 1

Deregulation refers to process of relaxation of several government restrictions and laws or freeing from government interference. The airline industry was first deregulated in 1978 to permit more competition into the aviation industry. Deregulation, has its minuses as discussed below:

--Airline deregulation may lead to heavy price to consumers because industry is manipulated by the natural monopoly

--Create agency problems because of expanding rivalry

-- With heavy competition various aircrafts may go bankrupt for not holding the capacity to produce a market remaining

--Deregulation might create near monopoly markets; and due to it organizations may become arrogant and lack coordination in strategic planning that may result to failing in its business activities in the long run