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◀ c h a p t e r f o u r Airline Deregulation and the Mega-Resorts 78 Congressional passage of the Airline Deregulation Act of 1978 could not have come at a better time for Las Vegas. Struggling to shed its reputation as a bastion of gambling, booze, sex, drugs, and organized crime, Las Vegas set out to seriously re-create its image, representing the new Las Vegas as a modern metropolis resembling other well-known cities in the nation and the world. Construction of exquisite high-rise casino-resorts run by Wall Street corporations instead of by Mafia bosses, an ambitious $30 million McCarran International Airport expansion plan, and seventeen airlines annually bringing in seven million passengers offered the city an opportunity to extricate itself from its hedonistic past. Such important changes would profoundly affect the existing symbiotic relationships among air travel, airport , and destination. The airlines needed to increase passenger flights from both national and international cities of origin. McCarran had to install longer runways for larger aircraft and build more modern terminals housing a variety of restaurants, lounges, and shops to accommodate huge numbers of travelers. Sparing no expense, corporate businesses intent on attracting world travelers had to design and build the most luxurious of mega-resorts with no fewer than 3,000 hotel rooms and modern state-of-the-art gaming tables and slot machines. By 1985 the number of airlines serving Las Vegas had increased from seventeen to twenty-one, a remarkable jump for a high-volume, low-yield leisure market that did not have the same profitability as the high-volume, high-yield business markets of Los Angeles, San Francisco, Chicago, and New York, which were dominated by the major airlines.1 While these cities attracted predominantly business and international travelers who were willing to pay higher fares, Las Vegas was just the opposite—it lured leisure travelers by offering bargain-basement fares from airlines like Southwest, America West, and National. Casino-resorts such as the Landmark, the MGM Airline Deregulation and the Mega-Resorts ▶ 79 Grand, and Caesars Palace offered discounted room rates to attract more customers, and that, along with the cheap airfares, was a winning combination for middle- and lower-income Americans. Duane Busch, TWA executive station manager in Las Vegas, confirmed this when he commented: “Deregulation afforded middle- and lower-income people the opportunity to travel at an affordable rate.”2 Southwest offered one-way fares from Las Vegas to Los Angeles and other California destinations for $29, a deal that was extremely difficult for United, Delta, and other major airlines to match.3 America West and National followed Southwest’s lead by creating their own niches in national markets, including the Las Vegas market, through cheap “red-eye” flights and low-fare transcontinental flights from Las Vegas to East Coast cities . Airlines like Southwest, America West, and National thrived on the business model of low fares, multiple flights, and excellent customer service, and cities like Phoenix, Las Vegas, and San Diego profited immensely from the resulting increases in the numbers of business and leisure travelers. Though deregulation brought great benefits to low-fare carriers and large cities, it also had its problems. Appearing before the Subcommittee on Aviation of the U.S. House of Representatives Committee on Transportation and Infrastructure, Joseph Leonard, CEO of AirTran, testified that smaller airlines such as his could not compete in certain markets—Minneapolis, Chicago , Atlanta, and Dallas among them—because of the dominance of the major airlines at hub airports.4 At a hearing of the Senate Committee on Commerce, Science, and Transportation, he and other regional airline executives expressed their concern about trying to compete in an environment of “predatory behavior where one airline accounts for more than 50% of the traffic.”5 This became problematic for second- and third-tier cities where residents had to drive to larger airports to catch their flights because the huband -spoke system was inconvenient and expensive. Passengers could not fly directly from one second- or third-tier city to another. They had to connect through a hub airport, which was time-consuming and unaffordable. The major airlines made substantial profits through this hub-and-spoke system because connecting flights ensured larger passenger loads. They opposed any policy changes that threatened the existing system, including deregulation . But during the Carter and Reagan administrations, the government viewed deregulation slightly differently. According to the U.S. General Accounting Office, if Congress had passed legislation deregulating the airline...

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