Airline Deregulation Act
The Airline Deregulation Act was a pivotal piece of legislation signed into law by President Jimmy Carter on October 24, 1978. This act aimed to remove government control over fares, routes, and market entry (of new airlines) from commercial aviation, thereby promoting competition and reducing fares for consumers.
Background and Context
Before the act, the Civil Aeronautics Board (CAB) had significant regulatory control over the U.S. airline industry since its inception in 1938. The CAB determined which routes airlines could fly, controlled fares, and limited new airlines from entering the market. This led to a highly regulated, monopolistic environment where airlines operated with little incentive to reduce costs or innovate.
Key Provisions
- Elimination of the CAB: The act phased out the CAB by 1984, ending its regulatory powers over domestic routes and fares.
- Route Freedom: Airlines were allowed to fly any domestic route without prior approval from the CAB, fostering competition.
- Pricing Freedom: Airlines could set their own fares, leading to more competitive pricing strategies.
- Market Entry: New airlines could enter the market more easily, although this was tempered by safety regulations managed by the Federal Aviation Administration (FAA).
Impacts
- Increased Competition: The number of airlines increased, leading to lower fares and more choices for consumers.
- Service Expansion: Airlines expanded to underserved regions, and new low-cost carriers emerged.
- Economic Effects: The airline industry saw significant growth in passengers and air travel affordability, although this came with increased volatility in airline profitability.
- Industry Consolidation: While initially promoting competition, over time, deregulation also led to mergers and acquisitions, reducing the number of major airlines.
- Consumer Rights: With deregulation, there were concerns about consumer rights, leading to subsequent legislation like the Airline Passenger Bill of Rights.
Controversies and Criticisms
Despite its intentions, the Airline Deregulation Act has been criticized for:
- The instability of airline companies, with many going bankrupt or merging.
- Hub-and-spoke systems leading to less direct service in smaller markets.
- Reduced service quality and customer service issues.
- Increased environmental concerns due to more flights and competition for landing slots.
Sources
Related Topics