Transit privatization

The 1970s were an era of deregulation within the U.S. Back then public transport (i.e. railroads in 1976 and airlines in 1978) were deregulated.[4] Ticket prices increase or decrease based on the service provided and the amount of public subsidies.

Different approaches to privatize railways in U.S. and Europe were taken. In Europe, rail operations were separated from rail infrastructure, while the U.S. railroad system is widely deregulated and vertically integrated.[5]

Another example were public owned bus companies in the U.K. Those companies were reorganized in 1985 into private companies (with the exception of London). Cost savings mainly resulted from reduced employment costs and increased productivity.[6]

A number of innovations were adopted by private bus companies in the pursuit of profits with the most important being the launch of minibuses that increased service levels.[7]

However, separating rail operations from rail infrastructure turned out to make coordination of rail operations and infrastructure maintenance more difficult.[8]

The changes to the U.K. bus industry as a result of privatization had in contrast to the changes to the U.K. railway industry no effects on its safety.[9]

In the U.K. privatising railways entailed cost overruns, accidents and, finally, the bankruptcy of the rail infrastructure company. For the rest of Europe the separation of rail operations from rail infrastructure did not cause substantial problems.[10] The McNulty review of the UK railway industry in 2011 found that the fragmentation of the industry in the course of privatisation had caused a permanent increase in costs of between 20% and 30%.[11]

By the same token, airline market reformation in Europe has been successful. Today, a single European airline market exists leading to improved productivity and decreased ticket prices. As in the U.S., low-cost carriers have affected the market and, thus, improved resource allocation.[12]