By Richard Vietor
This e-book explains how 4 significant firms--American airways, El Paso usual fuel, AT&T, and financial institution America--and their respective managements have been challenged by means of the deregulation of markets beginning within the past due Nineteen Seventies. The 4 tales illustrate the dynamic technique of industry restructuring and organizational adjustment, in addition to the ways that managers and regulators painfully discovered to function successfully as their monetary and political environments shifted round them.
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Extra resources for Contrived Competition: Regulation and Deregulation in America
It was passed in haste, and contained m a n y "ambiguous" and "definitely contradictory" provisions. 20 Competitive bidding (for mail contracts), arranged to encourage entry by smaller firms, succeeded for firms like Delta and the reorganized versions of Braniff and Continental. But the process resulted in such absurdly low bids (a few mills, or tenths of a cent, per mile) that no carriers made money during the next several years. Business grew slowly; competitive bidding, subsidies, partial entry restrictions, and enforcement by three separate government agencies (Post Office, Commerce Department, and Aviation Administration) made no sense to anyone.
Control of entry was, from the start, a difficult issue for the Civil Aeronautics Board. The airmail subsidy alone, and perhaps the industry's structural characteristics as well, appeared to warrant entry restrictions. Until the early 1950s, all certified carriers received subsidies (airmail payments in excess of airmail revenues). Since the availability of subsidies would attract a limitless number of entrants, the board had to restrict entry from the outset. But as early as 1941, the board also felt that grandfathered carriers could provide "sufficient" competition: "The number of air carriers now operating appears sufficient to insure against monopoly in respect to the average new route case .
With appallingly low load factors on the widebodies, American had to ground several 747s and eventually sell them off, just to save on operating costs. Spater's second mistake was to expand the firm's investment in hotels, 48 Contrived Competition including several in cities w h e r e American had no flight operations. Under Smith, American had gotten into the hotel business, in an effort to enhance customer service ("Fly American Stay Americana") by integrating downstream. American operated these properties through its Sky Chefs subsidiary, an otherwise profitable catering and airport restaurant business.
Contrived Competition: Regulation and Deregulation in America by Richard Vietor