What are the direct and indirect costs to the airline industries due to governmental deregulation? Provide an example of these direct and indirect costs

Deregulation caused the major airlines of the time, oligopolistic in nature, to lose business. The effect was one of the most direct impacts that the legislative process had on airlines. Those airlines that flew in-between states experienced direct competition between intra-state airlines that charged way less. Therefore, a majority of airline passengers quickly shifted to lowly priced airlines that were effectively allowed to broaden their flight paths across states.

Airlines were required to invest heavily in technology and other drivers of cost-effectiveness. Therefore, they incurred substantial opportunity costs as they had to redirect planned investments to buying capital goods. This placed a considerable financial strain on the majority of the airlines.

Labor unrest came as the indirect cost of government deregulation on airlines. During the regulated era, airlines earned robust revenues, and employees had unionized for high wages. However, the liberalization caused revenues to drop, and airlines couldn't afford to pay exorbitant salaries anymore. As employees took pay cuts or were let go, the unions arranged strikes that nearly led airlines like Continental Air Lines and Eastern Air Lines into near bankruptcy.