Ganesh Sitaraman
speaker
57 appearances
1 recordings
1 series
first heard Apr 2025
last heard Apr 2025
Ganesh Sitaraman’s voice in public audio — every appearance, attributed to the second.
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Appearances
Thanks so much for having me.
Well, like a lot of people, I fly a lot. And I've had my fair share of miserable flying experiences. But the other side of it for me is that I am a law professor and I study regulation and public policy. And so a few years ago, when we were in the midst of the COVID pandemic, And the airlines went to Congress and they asked for taxpayer support and they got it.
The year after that, we still had tens of thousands of flight cancellations and there was loss of service to cities. And what struck me was that there was a real policy story to be told here about why flying had gotten so miserable and why it's been miserable in this moment of crisis.
You know, to me, the worst experience is when you're in some giant hub connecting between two different cities and you run what seems like, you know, a half marathon to get from one side of the airport to the other side of the airport.
Carrying your stuff. And then you get there and at the end, you are just a few feet away when you see them close that door and you know they can't open the door once they've closed it and you've just missed your flight by seconds. To me, that's the most frustrating experience.
Everything that we think about in the country with flying is really a function of public policy choices. We decide as a country whether children's toys are safe, whether we want rural places to have electricity. These are all policy choices, and airlines are not so different.
So after the Wright brothers first had their flight at the beginning of the 20th century, the early years of airline flying was really subsidized by the government through the form of the post office. And there were subsidies for airmail. And the purpose of this was to build this industry up.
And so you had government really involved in that as a way to get there to be more airlines flying more routes to more places. And once the initial technology starts taking off and there's a bigger and bigger airline industry, by the 1930s, you get what I would think of as really the first modern era of airline policy. And this is a period of regulated competition.
And Congress created what they called the Civil Aeronautics Board, or CAB, which was a federal agency. And the job of the agency was to make sure that the airline industry was successful enough that the airlines didn't all go bankrupt, but not so successful that just one airline dominated and created a monopoly.
And the way they did that was that the Civil Aeronautics Board would allocate routes to different airlines, so which cities they could fly between, and it regulated the prices of those flights as well. And this had a really important effect, which is that it ensured that there would be geographic access to flying in lots of different parts of the country.
So places that are smaller cities, more remote, don't have that much volume, it might not be economical to serve them, would still get airline service. And that system worked pretty well, actually, for about 40 years, from 1938 to 1978. We had more people flying, there were big improvements in safety, and we had really big innovations, like the shift to the jet age.
Prices, interestingly, were also declining over this period. It was a really reliable, stable, workable system. And then in the 70s, you had this really big push for deregulating the industry. And the view was that the Civil Aeronautics Board was kind of like a government-run cartel. And the theory was maybe market competition would be better.
The pitch was something like, imagine if you had dozens, maybe even hundreds of airlines operating competitively with lower prices, with no losses of service. There'll be no real downsides.
It's a great pitch. And who wouldn't want to go for that pitch? And in fact, Congress then jumped at the idea and deregulated the industry in 1978. But as we all know, we didn't really end up in that world. What happened instead is that there was this moment of competition that started after deregulation, but then it quickly turned into something that I think of as more like the Hunger Games.
There was just cutthroat competition between these airlines. The new entrants came in. They offered no frills. They had no unions. They wouldn't take on these more rural routes. And that meant lower prices on the high traffic, high volume routes between big cities. It meant some more competition initially.
But then the big airlines, they fought back and they pushed out a lot of these new competitors and then afterwards raised prices. And that's when you also see this shift to these consolidated big fortress hubs like Atlanta or Dallas or Charlotte, where You have one airline that's really dominant in those cities. And by the end of the 80s, there had been dozens of bankruptcies, mergers.
There was a lot of conflict between labor and management. Quality of service was going down. There was a lot of lost baggage. The result was actually a reconsolidation to the same number, in fact, the same big airlines that existed under regulation.
And they were still the dominant players, but now without any of the checks of the regulated period, where there's very, very little competition, few choices. Often the prices aren't great. Sometimes the service isn't that great. But guess what? There's not much you can do about it because airlines are an essential service for how we get from place to place over long distances.
Yeah, it's a really interesting question. I think the conventional wisdom that we often hear is, well, after airline deregulation, prices went down. And that's true. Average prices went down after deregulation. But average prices were also going down before deregulation and at just about the same rate, which might get you asking the question,
Was it really deregulation that made the prices go down? You see prices going down in some places, but prices going up in other places. And a big function of that is how much competition there is.
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