Airline Deregulation Act
This article includes a list of general references, but it lacks sufficient corresponding inline citations. (January 2012) |
House Public Works on October 24, 1978 |
The Airline Deregulation Act is a 1978
History
Since 1938, the federal CAB had regulated all domestic interstate air transport routes as a public utility, setting fares, routes, and schedules.[1][2] Airlines that flew only intrastate routes, however, were not regulated by the CAB but were regulated by the governments of the states in which they operated. One way that the CAB promoted air travel was generally attempting to hold fares down in the short-haul market, which would be subsidized by higher fares in the long-haul market. The CAB also had to ensure that the airlines had a reasonable rate of return.
The CAB had earned a reputation for bureaucratic complacency; airlines were subject to lengthy delays when they applied for new routes or fare changes, and were often not approved. For example,
This rigid system encountered tremendous pressure in the 1970s. The
Leading economists had argued for several decades that the regulation led to inefficiency and higher costs. The Carter administration argued that the industry and its customers would benefit from new entrants, the abolishing of price regulation, and reduced control over routes and hub cities.[5]
In 1970 and 1971, the
The committee was deemed a friendlier forum than what likely would have been the more appropriate venue, the
In 1977, President
Dan McKinnon would be the last chairman of the CAB and would oversee its final closure on January 1, 1985.
Legislative terms
Senator Howard Cannon of Nevada introduced S. 2493 on February 6, 1978. The bill was passed and was signed by Carter on October 24, 1978.[6]
The stated goals of the Act included the following:
- the maintenance of safety as the highest priority in air commerce;
- placing maximum reliance on competition in providing air transportation services;
- the encouragement of air service at major urban areas through secondary (nonprimary) or satellite airports;
- the avoidance of unreasonable industry concentration which would tend to allow one or more air carriers to unreasonably increase prices, reduce services, or exclude competition; and
- the encouragement of entry into air transportation markets by new air carriers, the encouragement of entry into additional markets by existing air carriers, and the continued strengthening of small air carriers.
The Act intended for various restrictions on airline operations to be removed over four years, with complete elimination of restrictions on domestic routes and new services by December 31, 1981, and the end of all domestic fare regulation by January 1, 1983. In practice, changes came rather more rapidly than that.
Among its many terms, the act did the following:
- the CAB's authority to set fares was gradually eliminated;
- the CAB was required to expedite processing of various requests;
- standards were liberalized for the establishment of new airlines;
- airlines were allowed to take over service on routes underutilized by competitors or on which the competitor received a local service subsidy;
- American-owned international carriers were allowed to offer domestic service;
- the evidentiary burden was placed on the CAB to block a route as inconsistent with "public convenience";
- the CAB was prohibited from introducing new regulation of chartertrips;
- certain subsidies for carrying mail were terminated effective January 1, 1986, and Essential Air Service subsidies effective 10 years from enactment (however, as of 2013[update], the EAS is still in existence, serving 160 communities in the US);
- existing mutual aid agreements were terminated between air carriers;
- the CAB was allowed to grant antitrustimmunity to carriers;
- the FAA was directed to develop safety standards for commuter airlines;
- intrastate carriers were allowed to enter into through service and joint fare agreements with interstate air carriers;
- air carriers, in hiring employees, were required to give preference to terminated or furloughed employees of another carrier for 10 years after enactment; and
- remaining regulatory authority were transferred to the United States Department of Transportation (DOT) and the CAB itself was dissolved in 1984.
Safety inspections and air traffic control remained in the hands of the FAA, and the act also required the Secretary of Transportation to report to Congress about air safety and any implications that deregulation would have in that matter.
The ADA (along with the Montreal Convention with regard to international flights) also has the effect of preempting state law with regard to claims against airlines for delays, discrimination, consumer protection violations and other allegations of passenger mistreatment.[7]
Effects
A 1996 Government Accountability Office report found that the average fare per passenger mile was about nine percent lower in 1994 than in 1979. Between 1976 and 1990 the paid fare had declined approximately thirty percent in inflation-adjusted terms. Passenger loads have risen, partly because airlines can now transfer larger aircraft to longer, busier routes and replace them with smaller ones on shorter, lower-traffic routes.
However, these trends have not been distributed evenly throughout the national air transportation network. Costs have fallen more dramatically on higher-traffic, longer-distance routes than on shorter ones.[citation needed]
Exposure to competition led to heavy losses and conflicts with
For the most part, smaller markets did not suffer the erosion of service that had been predicted by some opponents of deregulation. However, until the advent of
In 2011,
What does the industry's history tell us? Was this effort worthwhile? Certainly it shows that every major reform brings about new, sometimes unforeseen, problems. No one foresaw the industry's spectacular growth, with the number of air passengers increasing from 207.5 million in 1974 to 721.1 million last year. As a result, no one foresaw the extent to which new bottlenecks would develop: a flight-choked Northeast corridor, overcrowded airports, delays, and terrorist risks consequently making air travel increasingly difficult. Nor did anyone foresee the extent to which change might unfairly harm workers in the industry. Still, fares have come down. Airline revenue per passenger mile has declined from an inflation-adjusted 33.3 cents in 1974, to 13 cents in the first half of 2010. In 1974 the cheapest round-trip New York-Los Angeles flight (in inflation-adjusted dollars) that regulators would allow: $1,442. Today one can fly that same route for $268. That is why the number of travelers has gone way up. So we sit in crowded planes, munch potato chips, flare up when the loudspeaker announces yet another flight delay. But how many now will vote to go back to the "good old days" of paying high, regulated prices for better service? Even among business travelers, who wants to pay "full fare for the briefcase?"[10]
See also
- Wright Amendment, a US Federal law to protect one Texas airport (Dallas/Fort Worth International Airport) from competition only months after the Airline Deregulation Act was signed into law.
References
- ^ "Air Transportation: Deregulation and Its Consequences". www.centennialofflight.net.
- ^ a b c "What Prompted Airline Deregulation 20 Years Ago? What Were the Objectives of That Deregulation and How Were They Achieved?". Findlaw.
- ^ Continental Air Lines, Inc. v. Civil Aeronautics Board, 519 F.2d 944, C.A.D.C. 1975.
- ISBN 978-0-226-77658-3.
- ISBN 978-0-8014-4747-1. Ch. 5.
- et seq. Approved October 24, 1978.
- ^ Nemsick, Judith R.; Sarah Gogal Passeri (1 October 2013). "Recent Rulings Find Preemption Of State Law Claims And Enforce Airline Contracts Of Carriage". Holland & Knight. Retrieved 4 October 2013.
- ^ Peterson, Robert (May 2018). "Impacts of Airline Deregulation" (PDF). TR News 315. Retrieved February 26, 2021.
- ^ "Airline Deregulation". Econlib. Retrieved 2021-02-26.
- ^ Breyer, Stephen (2011-01-20). "Airline Deregulation, Revisited". Business Week. Archived from the original on 2020-11-19.
Further reading
- Barnum, John W. "What Prompted Airline Deregulation 20 Years Ago? What Were the Objectives of That Deregulation and How Were They Achieved?", Presentation to the Aeronautical Law Committee of the Business Law Section of the International Bar Association, September 15, 1998.
- Derthick, Martha; Quirk, Paul J. (1985). The Politics of Deregulation. Washington, DC: Brookings Institution. ISBN 978-0-8157-1817-8.
- Robyn, Dorothy (1987). Braking the Special Interests: Trucking Deregulation and the Politics of Policy Reform. ISBN 978-0-226-72328-0.
- Rose, Mark H.; Seely, Bruce E.; Barrett, Paul F. (2006). The Best Transportation System in the World: Railroads, Trucks, Airlines, and American Public Policy in the Twentieth Century. Historical Perspectives on Business Enterprise. Ohio State University Press. ISBN 978-0-8142-1036-9.