The Airline Deregulation Act

Furthermore, the creation and enforcement of standards for pilots and aircrafts was instrumental in ensuring the advancement of commercial aviation. The Air Commerce Act of 1926 ensured that the federal government was able to supervise and regulate the airlines as they evolved from airmail couriers in small, single-engined aircraft to massive, dual-engine aircraft capable of transporting cargo and hundreds of passengers across thousands of

Before the Deregulation Act of 1978, the airline industry was federally regulated in regards to

Since deregulation (1978) the average return on investment below cost of capital for the 5 largest carriers. Due to 9/11 the demand for air travel declined sharply.

The United States Airline Deregulation Act of 1978 was a dramatic turning point in America. It was the first systematic dismantling of a comprehensive system of government control since the Supreme Court declared the National Recovery Act unconstitutional in 1935. It was also part of a broader movement that, with varying degrees of thoroughness, transformed such industries as trucking, railroads, buses, cable television, stock exchange brokerage, oil and gas, telecommunications, financial markets, and even local electric and gas utilities. Since the Airline Deregulation Act of 1978, the airline industry has experienced significant growth,

The first federal government regulations of the interstate airline industry were the Air Mail Act of 1925 and the Air Commerce Act of 1926. Additional federal regulation of commercial aviation was imposed with the passage of the Civil Aeronautics Act of 1938.

From the looks of it, it seems like the ones who gained from federal government deregulations are the people, deregulation has created lots of new jobs. In this article the author states what kind of jobs it created, “So there the airlines were, scrambling to add new routes, to add new flights, and to respond to the millions of extra Americans flying their services. What did this require the airlines to do? Yes - add more jobs” (“A History of US Airline Deregulation”). Think of all the people that were able to get a job, either as people who worked at the airport, taxi drivers, airplane workers, security people, and so on. Another benefit would be that safety/security increased both on airplanes and at the airport. As the author states, “Deregulation has encouraged the airlines to become more safety conscious rather than less.” (“A History of US Airline Deregulation”). One of the airlines main priorities would of course have to be safety, if deregulation caused for less carriers, less routes, more fees, you can expect for more

With the passing of the airline deregulation act of 1978, airline carriers were now provided with new options to help expand their route systems and to help the flexibility of innovative pricing structures. This flexibility allowed the carrier to now grow into new markets. Also, deregulation now brought many unwanted and very hostile takeovers and mergers. Many airlines became onboard with this and became giants in the industry.

The deregulation of the airline industry may have been a win for passengers, but most likely not a win for labor groups. Prior to deregulation the airline industry was highly unionized, enjoying excellent wages, benefits and pensions. Since deregulation there has been a drop in wages and most carriers have eliminated pensions. Also before deregulation, unions would bargain with management at each air carrier and once a contract was reached, the next carrier would begin bargaining from the other contract, to enhance theirs. This continued bargaining from carrier to carrier helped to build better work rules and compensation.

I would characterize the U.S. airline industry in the early 1990’s as a steak being trimmed of all its fat, the economic climate created a financial calamity of bankruptcies and collapse by major airlines, which in turn created opportunity for smaller more efficient carriers with cost advantages to enter a near oligopoly industry. The economic distress the airlines industry encountered was spawned from recession and a doubling of fuel prices during the Gulf War in 1991. Fuel, the second largest cost to the industry, an uncontrollable cost that raised havoc on this industry,

At the onset of the airline industry in the United States, major network airlines were the sole providers of air travel. This multifaceted industry was a difficult industry to break into as a consequence of “sophisticated customer segmentation, hub-and spoke models and costly information systems for reservations, fare wars and intense competition” (Thompson 2008). Shrinkage in airline ticket prices augmented the demand for airline travel. Many markets were simply deserted or over-looked by major network airlines; this is a region a fresh “second tier of service providers” could enter into. This endeavor proved to provide a consumer savings of billions per year. Thus in June of 1971, after a tumultuous battle with other Texas-based

The domestic US airline industry has been intensely competitive since it was deregulated in 1978. In a regulated environment, most of the cost increases were passed along to consumers under a fixed rate-of-return based pricing scheme. This allowed labor unions to acquire a lot of power and workers at the major incumbent carriers were overpaid. After deregulation, the incumbent carriers felt the most pain, and the floodgates had opened for newer more nimble carriers with lower cost structures to compete head-on with the established airlines. There were several bankruptcies followed by a wave of consolidation with the fittest carriers surviving and the rest being

Nowadays, the commercial competition has surpassed the limits of the previous era in which dominant markets are protecting their set market shares. Mega commercial activity back then was completely regulated by the government. The United States has privatized a lot of sectors related to energy, telecommunication, and transportation sectors. In response, the USA introduced the deregulations in the aviation industry to increase the competition in the aviation market.

On October 24, 1978, President Carter signed into law the Airline Deregulation Act. The purpose of the law was to effectively get the federal government out of the airline business. By allowing the airlines to compete for their customers' travel dollars, was the thinking, that fares would drop and an increased number of routes would spring up.

The years since regulation have been rocky for the airline industry. Airline after airline has declared bankruptcy and either ceased existence or emerged as a weaker airline. The surviving airlines have done so by merging and protecting their territory with tactics not even dreamed of in most industries. Robert Crandall said it best when he noted, "This is a nasty, rotten business (Petzinger,1995)." You would think that with the competition allowed by deregulation that a large number of new names would exist, but that does not seem to be the case. Most Americans still travel on American, Delta, United, US Airways, or Continental (Kane, 2003). The only true champion of deregulation is Southwest Airlines, whose success is paving the way for others such as JetBlue, but the obstacles are enormous. Initially, the airlines went after each other by slashing fares and driving competitors out of business. The industry quickly learned that although this tactic was effective, it was not profitable, and it was more economical to focus on controlling the air out of a few cities (hubs) than to attempt to directly compete in every single market. Since most of the major airlines already had key cities in which they controlled most of the takeoff and landing slots, airlines could charge higher fares and take in greater profits without any real head to head

1. Deregulation of the US airline industry in 1978 ushered in competition in the hitherto protected industry. Several low-cost, low-fare operators entered the competitive market after the deregulation.