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

Because Southwest's flights are generally an hour or less in length, the airline saves money by not

whether stockholders would realize a reasonable profit, even at today's low prices.

1993, p. 34). These figures enable the company to realize profits during years in which the industry as

ional and regional carriers were suddenly able to compete in an environment that resembled a free

light of the ValuJet crash (which brought increased attention to all low fare carriers).

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

The crash of Flight 592 has brought increased scrutiny to ValuJet (and to low-fare carriers in general),

face of the travel industry. After deregulation in 1978, the airline industry was forced to abandon its

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

Southwest's success has come about because it is providing a product that the market wants, no-frills

competition to either match the price or lose market share. In its target markets, Southwest has

ending up with a large number of older aircraft that it no longer needed (depending on the market), or

a negative effect on Southwest demand since it has indicated it will increase fares in only 20 percent of

Some common words found in the essay are:
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,
Approximate Word count = 1609
Approximate Pages = 6 (250 words per page double spaced)