Abstract
After deregulation, many carriers came into the airline industry to compete against the main airline companies. Why and in what way could these entries be successful? Government Regulation was the main barrier to entry in the airline industry. To regulate prices and stability of this industry, the government voted the Civil Aeronautics Act. The Civil Aeronautics Board had to administer the structure of the industry (attribution of interstates routes to the 23 airlines, safety guidelines priorities, rules for fares etc.). However, with the oil shock, the growing public dissatisfaction and the shift in political opinion, the decision to deregulate was taken. The major barrier to entry was broken, leading to a price war with the entry of many carriers. Every carrier could enter and prices were not regulated. The cost of customer switching was very low. Thus companies developed "frequent flyer schemes" to retain customers by issuing free tickets and upgrades on basis of number of miles flown, thus raising the "cost" to switch airlines.
