Airline Deregulation

Topics: Airline, Avianca, Airport Pages: 5 (1597 words) Published: July 23, 2013

Airline Deregulation act of 1978
Aston A Samms Embry Riddle Aeronautical University

Abstract

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, productivity, and the public has seen significant decreases in fares. The effects that Airline deregulation has had are generally a positive effect on the industry. This essay examines how further deregulation of the federally controlled and owned air traffic control systems will allow for further growth of the industry in the future.

Airline Deregulation
In 1978, economic policy experienced a dramatic event that would change the airline industry for decades to come. The United States Airline Deregulation Act of 1978 effectively broke down the government control of the industry and allowed the airline industry to flourish over the next 25 years. Before deregulation, the airlines were tightly controlled by the federal government. Because of this micromanagement, airline companies were few and competition was scarce. Prior to deregulation aircraft travel was a costly mode of transportation which was limited to the upper class. Because of the tight control the government had on it, the industry saw little, if any, significant growth. “The Airline Deregulation Act of 1978 phased out the government's control over fares and service and allowed market forces to determine the price and level of domestic airline service in the United States.”(Hecker, 2006) Limited competition did not allow competitive pricing, nor did it allow new airlines to emerge, which would offer more service to more areas. Since the Airline Deregulation Act of 1978, the airline industry has experienced significant growth, productivity, and the public has seen significant decreases in fares. Airline deregulation has provided exceptional benefits to the average air traveler. In a study conducted by economist from the Bookings Institution and George Mason University, it has been estimated that consumers have saved upwards of $19.4 billion annually thanks to airline deregulation. US Secretary of Transportation Samuel K. Skinner delivered a speech before the National Press Club in 1991. He spoke on the results of deregulation stating, “First, airline travel is much less expensive. Real airline fares have declined by an average of 28 percent since 1981. Second, because air travel is now accessible to millions of low- and middle-income Americans, the number of people who travel on scheduled airlines in the United States has increased 65 percent since deregulation. It is important to note that … almost 92 percent of new travelers flew on discount fares. Third, passengers enjoy a wider choice among airlines, and more frequent service. Three times as many passengers now travel in truly competitive markets, those served by three or more airlines, than did in 1978.”(Skinner, 1991) Consumers also benefit from greater areas of service since the deregulation. Since the deregulation of the air industry, airlines have had the freedom to extend their service to new areas where ever a need exists. In some cases this growth has allowed many people the opportunity to fly for the first time in their lives. Once airlines were free to control their own growth and marketplace, several things began to develop within the structure of the routes. During the first ten years of deregulation, the airlines shifted their operations from a...

Cited: Page
Author: Hecker, Jay Etta Z. “Reregulating the Airline Industry”
Source: GAO Reports, 6/12/2006, p1, 49p, 17 Graphs, 1 Map
Author: Skinner, Samuel K.
Source: Vital Speeches of the Day, 4/1/91, Vol. 57 Issue 12, p363, 4p
Author: Dobbs, Lou “Headed for Crash Landing”
Source: U.S. News & World Report, 12/6/2004, Vol. 137 Issue 20, p64-64, 1p, 2
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