Airline Deregulation

In 1938 , Civil Aeronautics Act was passed paving way for the creation of airline regulatory body known as Civil Aeronautics Board (CBA . The board was authorized to supervise , promote , and develop the air transport in the United States . Provision of safe , less expensive efficient and wide range of air service to the American Public was the main goal of CBA . To accomplish this , CBA regulated various aspects of the Aviation sectors . This included route and flight frequency , safety passenger and cargo fare , financing , merger and acquisitions , subsidies on certain routes and the

quality of service . On 24th October 1978 , the Airline Deregulation Act was passed and signed into law , removing the Civil Aeronautics Board control from Commercial Aviation Sector hence exposing airlines to market forces

Airline deregulation had many impacts , both positive and negative on short and long term basis . When the airline was regulated , new entrants into the airline market were at a disadvantage as they could not meet strict requirements set by CAB . It is important to note here that one of the most important functions of CAB was pick a particular airline to operate in a particular route as opposed to letting the market decide which airline should operate in that route . With deregulation , airlines could easily enter the market expand their routes as they wish and had the freedom to set fares

Another benefits brought about by deregulation was the drop in the average airfare for traveler . Between 1978 and 1992 , ticket buyer saved an estimated 100 billion on fares . Currently , travelers are saving approximately 12 billion per year as a result of low fares . Many small routes were not profitable to big carries , with deregulation there was proliferation of smaller airlines in these shorter routes . This resulted to an upsurge in the number of passengers from small communities and the establishment of new airlines

Deregulation had many negative impacts , to both the passengers and the airlines . Passengers from small community suffered as many airlines decided to abandon those routes that were allocated to them by CAB mainly because they were less profitable . Residents of the oil town of Bakersfield , California , for example , suffered when United Airlines pulled out of this route . This meant that the residents of this city could not get flights to big , important cities such as Las Vegas or Francisco

Establishment of operation hub by major airlines was necessitated by the need to dominate certain profitable routes after deregulation . Delta airline , for example established an operational hub in Atlanta while Eastern Airline established a hub in Miami area . To achieve their objectives , airlines started operating many daily trips from their operation hub to other destinations , keeping most of their airlines in the air for more hours than before , this in essence led to increased operation cost without much returns , thus reducing airline profits

With deregulation , many start up airlines entered the market without necessary agreeing to larger airlines demands . A good example was the entrance of People 's Express Airline , which introduced...