Transportation Regulation and Public Policy91CASE 3-2The U.S. Airline Industry Public SupportAfter the September 11 terrorist attack in 2001, the U.S. airline industry was grounded by the federal government for security reasons. During this forced grounding, the air carriers faced ongoing expenses, but no income. After the grounding order was lifted, the airlines began to restore flights, but the flying public was not flying. Planes were virtually empty, so the air carriers reduced the number of flights and placed planes in mothball storage. The financial plight caused by the grounding and subsequent reduction of demand was tremendous. Congress passed emergency legislation to provide operating funds for the air carriers to assure that U.S. citizens would have a viable air carrier system. These public monies helped sustain the industry while the flying public overcame its fear of flying. In 2008, after some airline mergers and proposed mergers, the airline industry is still in financial trouble. There is again a call for federal money to help support the vital air carrier industry. There are opponents who claim the air carrier plight is a result of mismanagement, overly aggressive flight scheduling that caused overcapacity, and an overall reduction in demand. On top of this, customer service ratings for most of the major U.S. airlines are suffering.CASE QUESTIONS1. 2. 3.What are the arguments in favor of the federal government providing financial support to the U.S. airlines What are the arguments against the federal government providing financial support to the U.S. airlines If federal financial assistance is provided, should the air carriers and/or the flying public be expected to repay the government If so, what form of repayment would you suggest Why
