History in Aviation

Airline Deregulation 1

Running Head : AIRLINE DEREGULATION ACT

A Closer Look at the Airline Deregulation Act of 1978 : The Events that Prompted its Passing and its Effects on the Aviation Industry

Airline Deregulation 2

Abstract

Prior to the approval of the Airline Deregulation Act in 1978 , the Civil Aeronautics Board (CAB ) determined the routes for airlines limited the entry of new airlines or of existing airlines into new markets , and regulated passenger fares . With the advent of widebody aircrafts which increased airline capacity in many routes and the skyrocketing

fuel prices due to the oil embargo in the Middle East during the early 1970 's , the air transport industry suffered heavy financial losses . CAB responded by allowing the airlines to increase their fares , to no effect . Even if newer aircrafts could accommodate more passengers , business continued to slow down because of the costly air fares . These events led to the approval of the Airline Deregulation Act , with the CAB slowly losing its control over airline companies until its eventual dissolution in 1984 . With deregulation , airlines were able to reduce fares by offering discounted rates . Furthermore , new routes were opened and smaller cities were given access to more air services Productivity increased and the intense competition among airlines compelled them to place more seats on the planes and have actually succeeded in filling up more of these seats . Deregulation also increased the level of safety in aircrafts and in general , improved the quality of airline services . However , as deregulation is not a cure-all for all the problems of the airline industry , issues continue to besiege the Airline Deregulation Act . Major aircrafts are seen to monopolize air traffic in their hubs by preferential access to airport facilities in these hubs and to computerized reservations which severely handicap smaller competitors . As an answer to this dilemma , the government should be able to impose the antitrust law , which acts against anti-competitive strategies . Furthermore , barriers to competition such as preferential treatment of major airlines and the monopoly of American carriers in airports should be removed Airline Deregulation 3

The Airline Deregulation Act , approved by the United States Congress on October 24 , 1978 , was a turning point in the aviation industry . Prior to deregulation , a government agency , the Civil Aeronautics Board (CAB determined the routes flown by each airline , as well as the prices that they charge . With deregulation , the fares and quality of service are dictated not by any agency but by customer demand and satisfaction ( Airline Deregulation , 2007 . The Act ushered in an era of greater competition among airlines , which resulted to lower prices , greater productivity and safer travels

A thorough discussion of the Airline Deregulation Act would require us to backtrack a few decades prior to 1978 . The Act and its effects can be fully understood by looking at the economic regulations before deregulation and the events that prompted its approval . One of the earliest economic regulation of airlines by the government concerned the airmail system (Mola , n .d . Because the government was...