Architect of US airline deregulation dies at 93

2010-12-28 08:03

Alfred E Kahn, who presided over the historic deregulation of the US airline industry during former US president Jimmy Carter’s administration, died on Monday (December 27, 2010) and the age of 93.

Kahn, an economics professor at Cornell University, died of cancer at his home in Ithaca, New York.

A leading scholar on public utility deregulation, Kahn led the move to deregulate US airlines as chief of the now-defunct Civil Aeronautics Board between 1977 and 1978.

The deregulation paved the way for JetBlue and other low-cost carriers.

The board had to give its approval before airlines could fly specific routes or change fares.

“Historically the board has insisted on second-guessing decisions by individual carriers to offer price reductions,” Kahn said in early 1978 as so-called “super-saver fares” swept the industry.

“During the last several months we have been abandoning the paternalistic role, leaving the introduction of discount fares increasingly to the management.”

Carter embraced deregulation as a means of stimulating economic growth.

Kahn was largely instrumental in garnering the support needed to push through the Airline Deregulation Act of 1978 – the first thorough dismantling of a comprehensive system of government control since 1935.

“I open my mouth and a fare goes down,” he quipped to The Washington Post in 1978.

By letting airlines instead of the government decide routes and fares Kahn is credited above anyone else with enabling a dramatic drop in airline fares and a boom in air travel over the last 30 years.

Deregulation opened the way for such carriers as People Express and JetBlue and allowed low-cost operators such as Southwest Airlines to expand nationwide.

But the move also contributed over the years to the death of such storied names as Pan American and the erosion of in-flight amenities.

Kahn was also a key player in a broader movement that persuaded Congress to give industries such as trucking, railroads, financial services, telecommunications and cable television the ability to set prices without government involvement.

In October 1978 Carter made Kahn his anti-inflation czar, with a mandate to curb rising costs in arenas such as food, medical care and energy. High oil prices, a weak bond market and a falling dollar fuelled an economic crisis in 1979 and inflation approached a yearly rate of 12%.

Inflation remained a big problem and contributed to Carter’s defeat to Ronald Reagan in his bid for a second term in 1980.
Kahn spent most of his career as a professor at Cornell, joining the faculty in 1947 and finishing as an emeritus professor of political economy.

He was widely regarded as one of the world’s leading scholars and influential figures in public utility deregulation.

Born in Paterson, New Jersey, in 1917, Kahn earned bachelor’s and masters degrees at New York University and a doctorate at Yale University in 1942.

Early in his career he worked for the Brookings Institution, the antitrust division of the Justice Department and the War Production Board.

After completing basic training in 1943 he served as an army economist for the Commission on Palestine Surveys. He was an assistant professor at Ripon College in Wisconsin from 1945 until 1947.

At Cornell he became an associate professor in 1950 and a full professor in 1955.

He was chairman of the school’s department of economics from 1958 to 1963, a member of the board of trustees from 1964 to 1969 and dean of the College of Arts and Sciences from 1969 to 1974.

In the early 1970s he wrote a study of government controls of private industry called The Economics of Regulation.

In 1974 he took a six-year leave from the university when he was appointed chairperson of the New York Public Service Commission, which oversaw regulation of electric, gas, telephone and water companies.

He introduced an electrical rate pricing system that gave breaks to users during non-peak hours and permitted rivals of Bell System competitors to hook up to the telephone giant’s equipment.

Kahn is survived by his wife, Mary, and three children and was the legal guardian of a nephew, Cornell said in its statement.

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