The vicious cycle: growth and declining quality in the US airline industry: some lessons for new start-ups

Since US deregulation, over 200 airlines have started up and failed (Rosen, 1995). While competitive pressures and economic conditions were a factor in the failure of many carriers, the issue of rapid growth and service quality has been blamed for the demise of these carriers. This paper examines the pressures that rapid expansion can create including downward spiralling levels of quality, declining load factors, and death. People Express represents the classic case of this syndrome in the airline industry. Its growth and service quality will be compared to Southwest Airlines, the original low-cost carrier. Further, the paper examines the growth rates and service quality at JetBlue, one of a new breed of low-cost carriers. Results indicate that JetBlue is currently posting growth rates somewhere between those of Southwest and People Express while improving its passenger complaint rates to a level nearly comparable to Southwest, an industry leader in service quality.