Airline Deregulation

Matt PaineBrian TappanSin Man WongNick FerdinandNate RiebelKyle Carnes

Airlines Before Deregulation

Civil Aeronautics Board (CAB), enacted in 1938 was an independent agency responsible for regulation in the air transport industry.Authority over airline routes, certification, agreements, and certain other matters.Main reason for CAB was to protect existing carriers from competition and allow an infant industry to grow.

Routes

The routes before Deregulation had to be approved by the Government.One Airline couldn’t Monopolize one route.

Agreements

Any agreements among carriers effecting air transportation had to be filed and approved by the CAB.The act directed board to approve agreements that were not adverse to the public interest, and to reject all those that were adverse.

Certification

A board issued certificate is required before any carrier may provide air service in the USA.

Scope & Purpose

To amend the Federal Aviation Act of 1958, to encourage, develop, and attain an air transportation system which relies on competitive market forces to determine the quality, variety, and price of air services, and other purposes

Effect of Deregulation

Routes: Airlines have the right to fly wherever they wantExample: Braniff AirlinesRates: Carriers have the right to raise fares– Price Wars

Promotions: After deregulation, carriers were permitted to market their airline.

Benefits

The two most important consequences of deregulation have been lower fares and higher productivity

Fares: Fares declined 30 percent in real, inflation adjusted terms between 1976 and 1990

Productivity: The introduction of the Hub-and-Spoke system has allowed increase efficiency by routing larger planes on busier routes and smaller planes on less traveled routes

Conclusion

Airline deregulation has workedIts provided the air transportation industry with a more flexible systemIt makes the airline industry more competitive internallyIncrease efficiency and productivity for the industry