(FORTUNE Magazine) – A PLANE RIPS open like a sardine tin in mid-flight, spilling an unfortunate stewardess to her death. Just about every aircraft you board seems packed. Just about every flight seems late. The attendants are too often unsmiling, the food unspeakable. Once-mighty airlines like Eastern and Pan Am struggle to stay aloft as enraged workers and creditors pick over bare corporate bones. Something is very, very wrong here, and someone had better do something about it -- fast. Is that scenario accurate? Many Americans emphatically think it is. They consider each flight a grim, possibly perilous ordeal. They are bewildered by the labor troubles and economic ills of the weaker carriers. With just eight airlines controlling about 94% of U.S. air traffic, passengers expect and fear soaring ticket prices. Ever more Americans question whether deregulating the industry a decade ago was such a smart idea after all. The old system seems a lot safer and saner in retrospect, and a lot of folks wonder just what the country has gained by loosening government controls. Reflecting the public mood, Washington officials talk increasingly of some sort of airline reregulation. The Senate Commerce Committee is holding crucial hearings this month to determine whether the big carriers are misusing their market dominance, and legislation to rein in the more expansive airlines could result. Says the committee's ranking Republican, John Danforth of Missouri: ''It would be hard to unscramble the egg, but we cannot have a system that is both deregulated and uncompetitive.'' Danforth and his colleagues would be well advised to tread lightly. For all the industry's woes, real and imagined, deregulation has been far from disastrous. In fact, air safety has improved dramatically, most passengers have many more choices of flight times and carriers, fares have declined sharply, and far more Americans are now able to use the system than before. Says David Swierenga, who analyzes key airline data for the Air Transport Association: ''When you look at the really important issues, the big picture if you will, deregulation has to be considered a public-policy triumph.'' Since the Airline Deregulation Act of 1978, congressional critics have steadily attacked the Federal Aviation Administration for failing to develop sufficiently rigorous maintenance inspection programs. Rapidly aging fleets are also cause for concern (FORTUNE, May 22). But reregulation is hardly the answer. The FAA can tighten inspection procedures and make sure the airlines pay more attention to older aircraft without new controls over fares and routes. Air safety has improved significantly. The major carriers recorded 300 accidents, fatal and nonfatal, in the nine years before deregulation, an average of 33 annually. In the first nine years following deregulation, accidents declined to 180, an average of 20 annually. Fatalities in the same periods fell from 1,459 to 1,036. Considering the enormous increase in passengers, those improvements are even more pronounced. Fatal accidents per million miles traveled declined 57%. THESE SAFETY improvements, coupled with the increased air travel brought on by deregulation, have had salutary spillover effects. Economist Richard B. McKenzie of the University of Mississippi published a study last year detailing the extraordinary benefits of moving more people through the air and fewer on the highways. Between 1979 and 1985, he concludes, the shift reduced auto accidents by more than 600,000 a year, lowered annual economic losses from such accidents by nearly $2 billion, decreased auto injuries by about 66,000 per year, and reduced annual automotive deaths by just under 1,700. Says McKenzie: ''If you do anything to make it harder for people to fly, you could end up killing more of them on the ground.'' Industry experts argue that federal intervention that relies on market forces could enhance air safety still further. Michael E. Levine, dean of Yale's school of management and an original architect of deregulation while chief of staff at the old Civil Aeronautics Board, has called for a steep federal congestion tax on carriers wishing to use crowded airports at peak hours. The carriers would presumably pass the tax on to passengers. All revenues from the tax would be used for expansion of congested airports. Fewer people would want to pay a premium for peak-hour flights, Levine figures, and fewer flights equals less congestion equals safer skies. Leon N. Moses, professor of economics and transportation at Northwestern University, stresses that congestion fees should apply to private aircraft as well as commercial jetliners. Landing fees today are based on an aircraft's weight, so that a small corporate jet might pay as little as $25 to land at a big-city airport while a jumbo jet is assessed $800 or more. Yet that small plane uses as much runway space and ties up the air-traffic-control system as much as a loaded jumbo. Moses concedes that his call for greater equity and efficiency may go unheard on Capitol Hill because private-aviation lobbyists are particularly influential. ''It's like dealing with the National Rifle Association,'' sighs Moses. But he and other aviation experts point to results at Boston's Logan Airport, where landing fees for small aircraft were sharply raised last year to cut congestion. Private aircraft flights into Logan decreased 34%, on-time performance of commercial aircraft improved about 24%, and overall passenger traffic picked up 3%. The Department of Transportation, at the behest of private aviators and commuter airlines, has since blocked the new fee structure. The carriers' record on customer service since deregulation is not as good as on safety. Even the most fervent deregulation advocates admit air travel today often involves more hassles than before. But the most crucial service factor, availability of flights, has improved markedly. U.S. airlines flew 85% more miles last year than they did before deregulation, providing passengers with far more choices of when and which carrier to fly. Would-be reformers must also consider the great democratization of air travel that deregulation has wrought. As recently as 1971, half of all Americans had never flown on a commercial aircraft. Deregulation's lower ticket prices have opened up the skies for millions, and by last year three out of four Americans had flown. Passenger boardings have soared from about 275 million in 1978 to about 455 million last year; airlines' average load factors have moved from less than 55% before deregulation to about 62% today. Of course all those extra folks constitute the airlines' biggest service problem -- and longtime fliers' greatest woe. The care and feeding of a full planeload is tough, and no passengers like an aircraft packed to capacity. But, in terms of public policy, so many more Americans' access to air travel must be viewed as a signal benefit of deregulation. LATE OR CANCELED flights, flagrant overbooking, mechanical problems, lost or battered luggage, inept ticket-counter and in-flight staff -- there are signs also that many of these most egregious service problems brought on by deregulation are easing as the industry heads into the latter stages of its economic shakeout. A few troubled airlines such as Eastern and Pan Am are still in turmoil. But most weak carriers have been gobbled up, and the biggest mergers have probably already taken place. Crews from different lines have learned to work together, and the carriers have learned to mesh disparate technologies. Passenger complaints to the Department of Transportation last year fell 47%. The beleaguered business traveler may find flying less odious in the future. Though price competition will continue fierce in certain markets, all the major lines have begun turning to improved service for an edge. ''The good news for the frequent-flier business guy is that these carriers want him bad,'' says Yale's Michael Levine. ''That could mean special check-ins, special meals, maybe bigger seats -- anything they can do to get that full- fare passenger on board. As the system becomes oligopolized, service becomes important again.'' Critics of deregulation often assail the concentration of market power in the hands of relatively few big players. The past decade's air wars have indeed caused severe casualties, and the megacarriers undeniably wield oligopoly power in some areas of the marketplace. When a controlled market is suddenly freed up, such an outcome should hardly be a surprise. As Robert P. Neuschel, managing director of Northwestern's Transportation Center, puts it, ''Small differences in management skill suddenly loom large. The strong get stronger, and the weak are going to die.'' Besides, deregulation has actually increased competition in many markets because carriers no longer need government permission to take on new routes. In 1979, 22% of the traffic was in markets where a single carrier controlled 90% or more of the traffic. Today that number has dropped to 11%. Also in 1979, only 4% of the traffic was in markets where at least four carriers had 10% or more of the business. Now, 20% of the system supports four or more significant competitors. The most potent testimony to vigorous competition in air travel is the industry's record on pricing. Adjusted for inflation, air fares declined 21% from 1978 to 1988. The Federal Trade Commission estimates that deregulation so far has saved passengers about $100 billion. Certainly the industry requires some government scrutiny. Critics have correctly identified several areas where the big carriers have muscled out competition. Senator Danforth seems most annoyed by the so-called fortress hubs that have sprung up around the U.S. At nine major airports, a single carrier controls over 60% of all traffic. In some cases this market dominance has resulted from mergers that, in retrospect, the Justice Department or DOT might have studied more closely. After buying Ozark Air Lines, TWA ended up with 83% of the business at Lambert Airport in St. Louis. Since its merger with Republic, Northwest controls 77% of the flights in and out of Minneapolis and 62% of Detroit's traffic.* SOME CARRIERS with clear dominance in a market seem to be aggressively exploiting their advantage. A DOT study found that between 1985 and 1988, ticket prices rose 11%, but they shot up 21% to 35% at seven of the fortress hubs. The DOT report considers a variety of causes for the disparity, including the possibility that increased demand led to fewer discount fares in some of the targeted markets. But other studies, notably one from the General Accounting Office last year, suggests single-carrier dominance as a prime cause of the fare hikes. Dean Levine of Yale points out an irony of the situation: Many consumers in these fortress-hub cities at first applauded their new status because they could choose from many more flights in and out of their home base. ''They made a kind of devil's bargain,'' says Levine. ''Of course, nobody much likes it when the devil comes around to collect.'' Whether or not his constituents in St. Louis saw trouble coming, Danforth seems intent on redressing what he considers an injustice. Says he: ''Lack of competition is something that is inherently wrong.'' Just what Congress or DOT might do to attack the problem is still unclear. The most obvious solution, a Draconian one, would be placing a fare cap on any carrier with gross dominance in a specific market. The airlines could respond by cutting the number of flights or reducing the percentage of discount tickets they sell. Some experts predict the slash and thrust of competition will eventually settle the matter. They reason that big, rapidly growing carriers like American and Delta, with their insatiable appetites for new markets, will not long let any rival go unchallenged. The problem with that theory, in many cases, is that established carriers so strongly control limited ground facilities or attractive landing slots that entry by a new player is all but impossible. Says Tulinda Larsen, vice president for economic analysis at the Washington consulting firm Airline Economics Inc.: ''The sad truth is, we don't have enough capacity to have a totally free market.'' These restrictions bedeviled the small airlines that sprang up over the past decade, and only a handful have survived. Among the survivors is Edward R. Beauvais's Phoenix-based America West Airlines, up from nothing in 1983 to $776 million in revenues this year. Yet he fiercely denounces what he considers unreasonable market dominance by the big carriers. Says he: ''Oligopoly is worse than reregulation.'' Beauvais has faced considerable trouble building a nationwide route structure. Established carriers can make it extremely tough for an upstart to enter new markets. At four crucial airports -- Chicago's O'Hare, Washington's National, and New York's La Guardia and Kennedy -- the FAA restricts the number of takeoffs and landings during peak hours, and these slots have become so valuable that incumbent carriers will not give them up. Samuel C. Buttrick, airline analyst at the brokerage firm Morgan Keegan & Co., estimates the aggregate value of landing slots at at these four airports at almost $2.8 billion. Just two carriers, United and American, hold about 44% of them. Partly as an effort to force his way into the restricted Northeast market, Beauvais recently bid $415 million for Eastern's New York-Washington-Boston shuttle service, but couldn't line up financing in time. Even at airports without official restrictions on takeoffs and landings, new entrants cannot expect a welcome mat. Incumbent carriers often hold long-term leases with clauses allowing them control over the construction of gates and other ground facilities that might accommodate a newcomer. Established airlines may in effect hold veto power over new competition. MORE BARRIERS face the carrier that somehow manages to squeeze into a new market. Any hub operation depends on dozens of small spoke flights that feed into longer, more lucrative routes, but chances are that the incumbents already will have tied up all the regional and commuter carriers in the area. The eight major airlines now either own or have marketing arrangements with 48 of America's 50 largest regional and commuter carriers. Frequent-flier programs also limit a newcomer's chances. Captive customers intent on building up mileage don't like to switch. Tearing down these barriers will not be easy. DOT planners show little interest in handing over precious landing slots to new entrants, though a congestion tax might ease the way for them by thinning out private traffic. The problem of long-term leases may be fixing itself. At many big airports, municipalities are refusing to renew those pacts and are taking back control of ground facilities from the airlines. No one is seriously considering fiddling with frequent-flier programs now. Even Beauvais concedes that abolishing them would be extremely unpopular, though he says the IRS should probably take a closer look at them. All those free flights are worth something, and he suggests perhaps the recipients could be taxed on the value. He and other critics are far more feisty about the big carriers' computer reservations systems. Travel agents write between 80% and 90% of all airline tickets, and nearly 60% of those agents use systems run by United or American. Because of bonus programs and other incentives, agents have strong reasons to book clients on their computer system's carrier. American recently sought to tighten its grip even more by combining its service with Delta's to form a single megasystem with a huge market share. The Justice Department is studying the proposal. Even if Justice turns back American this time, the extreme market control exercised by just two carriers troubles many experts. Beauvais advocates the ultimate solution. ''Divestiture ((of the computer systems)) is the only answer,'' he says, and he is by no means the only industry insider so disposed. More moderate critics suggest that carriers with computer systems at least should be forced to make public the financial incentives they offer travel agents. United and American have lost market share to smaller competitors in recent months, but their sway remains so considerable that Congress, DOT, or Justice may act to limit them somehow before long. For the consumer, restricted competition means fares that are beginning to edge back up. One reason: The airlines have become more sophisticated about yield management. For example, carriers used to discount remaining seats in the moments just before a flight took off on the theory that a low-fare passenger was better than none at all. They have since discovered that almost all passengers who arrive at the gate just before takeoff are willing to pay full fare simply to get on the flight. Carriers are also raising fares on many routes. Airline revenues increased 13% over last year in the first quarter of 1989, even though traffic was flat and the percentage of discounted tickets was down. The intelligent response to creeping air fares is, Let them creep. Ticket prices in the U.S. remain a bargain. Just ask the Frenchman who pays $170 in coach for the one-hour hop from Paris to Amsterdam. Remember that inflation- adjusted fares are still a lot lower than they used to be. Besides, in terms of national policy, higher air fares have to be viewed as something of a necessary evil. During the first decade of deregulation, airline profits averaged a scant 0.7% of revenues. Even with last year's revenue boost the lines netted only 2.6%. Sloppy management is clearly not the problem; labor productivity in the industry has jumped nearly 30% over the last decade. U.S. air traffic is likely to double by 2000, and only more equitable pricing will provide carriers with the $100 billion or so they will need in the next three years for new aircraft to replace aging fleets and increase capacity. What's the bottom line? Everything we rightly demand from the airlines -- superlative safety, better service, reasonable fares -- depends on their ability to refurbish their fleets with larger, more fuel-efficient planes. We will get what we pay for. And financial reality, not the bureaucratic imperatives that reregulation would create, should determine just how much we will pay.

CHART: NOT AVAILABLE CREDIT: SOURCES: AIR TRANSPORT ASSOCIATION: DEPARTMENT OF TRANSPORTATION. CAPTION: HOW AIR TRAVEL IS BETTER SINCE DEREGULATION Passenger boardings are up sharply while inflation-adjusted fares, complaints, and fatal accidents have tumbled since the Civil Aeronautics Board and its restrictions disappeared. DESCRIPTION: Four charts: PASSENGERS; FARES; COMPLAINTS; FATAL ACCIDENTS.