The strike at Eastern Air Lines has poured new fuel onto the debate about the deregulation of the airline industry.
The possibility that Eastern might not survive its current labor conflict is stirring fears that the industry may become even more vulnerable to fare increases imposed by a relative handful of dominant airlines.But if Eastern created a vacuum, other airlines were prepared to fill it.
Eastern's major competitors, including Delta, USAir and American, picked up Eastern's passengers in markets they shared and prepared to move on markets Eastern might abandon. The Pan Am Shuttle was a major beneficiary of the strike, doubling its service while Eastern's was virtually shut down.
By the time Eastern announced plans to reorganize under the federal bankruptcy law, its competitors already were kicking the tires on the airplanes and making shopping lists for assets that Eastern might sell.
It was a healthy display of competitiveness, but perhaps not enough to quell a growing sense of uneasiness about airline deregulation and the declining numbers of major competitors in the industry.
"We can't afford to have Eastern out of business, because that's going to make one less player, one less company in the competitive deregulated environment," said Transportation Secretary Samuel K. Skinner, who has appointed a task force to study the competition issue.
The concern about increasing concentration in the airline industry, where nine major carriers control more than 90 percent of the domestic market, has been building over the last several years as airlines have failed or have been acquired by other carriers.
Skinner's predecessors at the Department of Transportation presided without blinking over 21 mergers. The wave of new entrants into the industry that followed deregulation ebbed quickly.
In the past decade, airline prices have risen at half the rate of the consumer price index. But last year, after several years of fare wars, fares began to creep up.
Today, the industry looks a lot like it did in the years preceding deregulation, with a huge share of the market dominated by a handful of carriers.
But there are differences. The dominant carriers before deregulation were essentially regional monopolies that seldom competed head-to-head. Now the dominant airlines operate national networks and move easily into each others markets.
Some of the aftermath of deregulation was predictable - for instance, that there would be losers.
Eastern, which sought federal subsidies to stay in business before deregulation, looked like a probable loser, but so did some other major airlines that have prospered.
"The underlying premise of those who were pro-deregulation was that you would recycle the old inefficient elephants into bright bushy-tailed flying squirrels, that aircraft and labor would be recycled into more efficient companies," Maldutis said. "The old companies would not be able to survive the onslaught of People Express and the others."
"But just the opposite occured. . . . It's the large carriers who by and large adapted, changed and became more efficient, except for a few such as Eastern," Maldutis said.
Almost all of the major airlines today were important airlines before deregulation: United, American, Continental, Delta, Trans World Airlines, Pan American World Airways, and Eastern.
The carriers entered the fray with powerful advantages over the upstarts, but most of them also made significant changes, said Michael E. Levine, a professor of management studies at Yale University.
The carriers became national rather than regional and became vertically integrated, controlling traffic from feeder routes to long-haul routes and to international routes. They developed hub and spoke systems that allowed them to more efficiently fill airplanes and move into more markets. The airlines developed sophisticated fare structures, using discounts to fill up seats that would otherwise be empty, and were able to attract business travelers with frequent-flier bonuses. The airlines also reduced labor costs.
Eastern made many of those changes, but for the most part the airline lumbered through the decade still looking like a dinosaur.
In the 1950s and 1960s, Eastern had been slow to take on jet aircraft, Eastern President Phil Bakes said. This caused the airline to operate at a technological disadvantage.
In the 1970s, with losses and with some of the highest labor costs in the industry, Eastern borrowed heavily to stay in business.
Eastern executives threatened bankruptcy in the 1970s and again in the 1980s, even before the company was acquired by Frank Lorenzo's Texas Air Corp.
The percentage of operating income Eastern spent on salaries, benefits and interest payments became the highest in the industry.
Although Eastern employees made concessions over the years to help keep the airline aloft, labor relations continued to be rocky.
Lorenzo's ability to cut labor costs dramatically at Continental after he put that carrier into bankruptcy protection forced changes throughout the airline industry. Other carriers reduced costs and got the worst of their labor relations behind them. That didn't happen at Eastern.