After the September 11, 2001, terrorist attacks, airplanes, once symbols of an affluent and mobile America, became associated in many people’s minds with death and destruction. Indeed, news footage of two commercial airliners crashing into the World Trade Center became proof of the nation’s vulnerability to terrorism. Unsurprisingly, the attacks prompted urgent calls to protect the nation from further terrorist acts, and the first item on most people’s list was enhancing airport security. Responding to the challenge, in November 2001 President George W. Bush signed legislation creating the Transportation Security Administration (TSA), which makes the federal government responsible for security at the nation’s airports.

Under the old system the airlines provided security. Due to the highly competitive nature of the airline industry, however, airlines frequently hired the lowest-bidding private security firms as a way...