Competitive Innovation in the U.S. Airline Industry

Innovation in the U.S. airline industry offers lessons in the role that the interplay of competitive forces can play in economic progress. The quarter-century following deregulation saw many attempts at innovation, some of which were adopted for a time and then replaced by other innovations. After two decades of upheaval and evolution the airline industry has been reshaped along the lines of lower prices, more choices, and better service. This paper looks at these patterns of competitive evolution in terms of how they played out over time and against one another on the part of incumbents and new entrants. What emerges is a rich interplay of technological innovations, institutional changes, and new business practices that can be understood in terms of their joint contribution to economic progress.