The airline industry has been subject of intense price competition since it was deregulated, and theresult has been a number of new carriers which specialize in regional service and no-frills operations.These carriers typically purchase older aircraft and often operate outside the industry-wide computerizedreservations system. In exchange for these inconveniences, passengers receive low fares relative to theindustry as a whole. This research examines two low fare air carriers, ValuJet and Southwest Airlines.By investigating these air carriers, we can better understand the economic impacts of price versusservice in the airline industry as a whole, as well as, the impacts on passenger and investor confidence. Until 1978, air transport rates were approved by the government, which meant that price was not a primarycompetitive factor. Instead, airlines would compete on service and image. The airline industry wasdominated by giants (American, United, TWA) which offered nationwide and some international service, andby regional carriers, such as Southwest, which offered short trips betwe......

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