The Associated Press December 27, 2010, 11:30PM ET

Architect of airline deregulation dies in NY at 93

An economist who presided over the sweeping deregulation of the airline industry during the Carter administration has died.

According to a statement from Cornell University, Alfred E. Kahn died Monday of cancer at his home in Ithaca, N.Y. He was 93. A school spokeswoman confirmed his death.

Kahn was an emeritus professor of political economy at Cornell and a leading scholar on public-utility deregulation.

He led the move to deregulate U.S. airlines as chief of the now-defunct Civil Aeronautics Board in 1977-78. The board had to give its approval before airlines could fly specific routes or change fares.

His efforts opened the way for low-cost carriers such as JetBlue.

President Jimmy Carter embraced deregulation as a means of stimulating economic growth.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.

ROCHESTER, N.Y. (AP) -- Alfred E. Kahn, who presided over the historic deregulation of the airline industry during the Carter administration, paving the way for JetBlue and other low-cost carriers, died Monday. He was 93.

Kahn, an economics professor at Cornell University, died of cancer at his home in Ithaca, N.Y., the school said in a statement.

A leading scholar on public-utility deregulation, Kahn led the move to deregulate U.S. airlines as chief of the now-defunct Civil Aeronautics Board in 1977-78. The board had to give its approval before airlines could fly specific routes or change fares.

"Historically, the board has insisted on second-guessing decisions by individual carriers to offer price reductions," Kahn said in early 1978 as so-called "super-saver fares" swept the industry. "During the last several months we have been abandoning the paternalistic role, leaving the introduction of discount fares increasingly to the management."

President Jimmy Carter embraced deregulation as a means of stimulating economic growth. Kahn was largely instrumental in garnering the support needed to push through the Airline Degulation Act of 1978 -- the first thorough dismantling of a comprehensive system of government control since 1935.

"I open my mouth and a fare goes down," he quipped to The Washington Post in 1978.

By letting airlines instead of the government decide routes and fares, Kahn is credited above anyone else with enabling a dramatic drop in airline fares and a boom in air travel over the last 30 years.

Deregulation opened the way for such carriers as People Express and JetBlue, and allowed low-cost Southwest Airlines -- which had up until then operated only within Texas, outside of CAB's reach -- to expand nationwide.

But the move also contributed over the years to the death of such storied names as Pan American and the erosion of inflight amenities.

"While the resulting competitive regime has been far from perfect, it has saved travelers more than $10 billion a year," Kahn wrote in a 1998 New York Times essay.

Kahn was also a key player in a broader movement that persuaded Congress to give industries such as trucking, railroads, financial services, telecommunications and cable television the ability to set prices without government involvement.

In October 1978, Carter made Kahn his anti-inflation czar, with a mandate to curb rising costs in arenas such as food, medical care and energy. High oil prices, a weak bond market and a falling dollar fueled an economic crisis in 1979, and inflation approached an annual rate of 12 percent.

"It's housing costs, it's insurance regulation, it's everything in the world," he told The New York Times in 1979. "Sometimes I feel it (inflation) touches so many things, it's an area as wide as the ocean, but I've been about one molecule deep."

Inflation remained a big problem and contributed to Carter's defeat to Ronald Reagan in his bid for a second term in 1980.

Kahn spent most of his career as a professor at Cornell, joining the faculty in 1947 and finishing as an emeritus professor of political economy. He was widely regarded as one of the world's leading scholars and influential figures in public utility deregulation.

Born in Paterson, N.J., in 1917, Kahn earned bachelor's and master's degrees at New York University and a doctorate at Yale University in 1942. Early in his career, he worked for the Brookings Institution, the antitrust division of the Justice Deptartment and the War Production Board.

After completing basic training in 1943, he served as an Army economist for the Commission on Palestine Surveys. He was an assistant professor at Ripon College in Wisconsin from 1945 until 1947.

At Cornell, he became an associate professor in 1950 and a full professor in 1955. He was chairman of the school's department of economics from 1958 to 1963, a member of the board of trustees from 1964 to 1969, and dean of the College of Arts and Sciences from 1969 to 1974.

In the early 1970s, he wrote a study of government controls of private industry called "The Economics of Regulation."

In 1974, he took a six-year leave from the university when he was appointed chairman of the New York Public Service Commission, which oversaw regulation of electric, gas, telephone and water companies.

He introduced an electrical-rate pricing system that gave breaks to users during non-peak hours and permitted rivals of Bell System competitors to hook up to the telephone giant's equipment.

Kahn is survived by his wife, Mary, and three children and was the legal guardian of a nephew, Cornell said in its statement.


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