The airline industry was subordinate to the rules established by the “Civil Aeronautics Board (CAB)” from 1938 to 1978 when President Jimmy Carter signed the 1978 airline deregulation act. During the period of rigid regulation by the government, the American economy was faced with significant instability leading to rapid inflation (1973) and the oil crisis (Andrew 2011). Business people and the airlines’ workers felt the urge for freedom of the airlines from Government control over airline flight schedules, routes, fares, and market entries. The discussion below is a precise illustration of why the airline deregulation was inevitable and the most critical aspects that were contributed by the airline deregulation.
To begin with, the airline deregulation act of 1978 entirely altered the United States aviation to a better industry. The airline customers had been denied so much in terms of convenient time and flight schedules. Therefore, the Act enabled airline customers to be valued as the priority of the industry. People gained the freedom of movement using aircraft during the 1990s than they had before 1978. For instance, the 1996 reports indicated that there was a 9% reduction in fares per passenger per mile since 1979 (Smith and Cox 2007). Through the Act, the airlines increased their flight routes and were able to enter freely in the foreign markets, which were formerly controlled by Pan American World Airways. The lawmakers provided support for the deregulatory bill because they understood the success of the action.
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The US economy has improved with the airlines’ deregulations act. People are now able to fly all over the world with any airline they choose at a convenient time. The airline prices are low due to increased competition from different diverse airlines across America. Since the signing of the airline’s deregulation act, new passengers were reported to flock to airports. Without the Act, the airline industry would be dominated by the government monopoly that would still restrict flights into and out of the United States. Additionally, safety was a critical factor in airline commerce, and therefore the airline deregulation act aimed at improving the scrutiny of air accidents. Typically, the few operational airline industries would not be careful about customer safety because the government has control over their flights.
Two well-known airline industries (TWA American and Eastern) were not thrilled by the idea of airline deregulation because they received special interests from CAB. However, the other minor airlines felt discriminated from carrying out their daily routines, and therefore there was a need to raise their voices for equality. Notably, if the Airlines Deregulation Act was not embraced, only a few significant airlines would exist with extremely high flight fares in the United States. As a result of the Act, the airlines can follow the point-to-point model over the formerly prominent Hub-and-spoke model characterized by massive government regulation. Through the “point-to-point model”, passengers can access their small destinations without necessarily going through a major hub.
In summary, the Airline Deregulation was practically inevitable because it changed the airline industry and the operational culture for better. According to Button (2017), the Act propelled the changes in the current airline industry and shaped the monopoly state inherent since 1938. Generally, the American economy has grown tremendously with a reduction in oil prices, reduction in transportation fares, and reduced restrictions on flights. The main aim of the Act was to gain full control of the flight operations and access to the restricted trade areas. If the Act could not be signed, there would be a high risk of inflation and weak economic growth due to limited access to markets.
References
Andrew R. (2011). Soft Landings: Airline Industry, Strategy, Service and Safety. A press. pp. 32, 34. ISBN 978-1-4302-3677-1 .
Button, K. (Ed.). (2017). Airline deregulation: international experiences (Vol. 1). Routledge.
Smith Jr F. L., Cox B., (2007). Airline Deregulation, The Concise Encyclopedia of Economics, Liberty Fund Inc. , 2. Edition
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