There is a related article on the telecommunications industry by Paull Starr in the new TAP, but it is not yet online.
“What’s truly amazing is that US Airways could go bankrupt, despite tactics that would make an old-fashioned robber-baron monopolist blush. For instance, US Airways has a monopoly on nonstops between Washington and Boston. It charges around $670 for a basic roundtrip fare. It controls 74 percent of flights in and out of Philadelphia, and charges as much as $550 for a roundtrip flight between Pittsburgh and Harrisburg, Pa. It is literally cheaper, and almost as fast, to take a taxi.
The airlines are suffering (along with the passengers) not because of bad management but because this industry, like telecommunications, was never a good candidate for deregulation. Either there is genuine competition — in which case passengers get good deals and carriers go broke — or the airlines find ways to accumulate monopoly power and consumers get snookered. Competition just doesn’t produce a happy medium. Sometimes, as in the case of US Airways, there is simultaneously the worst of both worlds: monopoly power over and exorbitant prices on some routes without enough income to make up for the ruinous competition on others.”