Airline Deregulation Act Of 1978

Airline Deregulation
I. Summary
Airline Deregulation is a process of removing imposed entry and price restrictions to airlines by the Government. The United States deregulated its Airline Industry in 1978 due to the Airline Deregulation Act of 1978. The Deregulation Act of 1978 removed the federal government’s authority over fares, routes, and market entry for new airlines. This introduced a free market for the commercial airline industry. By doing this the number of passengers flying and miles flown by the aircraft dramatically increased due to a great increase in the number of flights and a decrease in the fares charged by the aircraft companies. Lastly the Deregulation Act of 1978 phased out the power of the Civil Aeronautical Board but

Since 1938 the Civil Aeronautics Board was regulating all of air transport routes; they set the fares, routes and schedules. The problem with this was the regulation of fares provided no incentive for newer companies to enter the business, it also did not push advancements for existing airlines due to the lack of economic gain it would accomplish. When the Civil Aeronautics Board introduced the regulation to increase the existing airlines Rate of Return it dramatically increased the profit that the companies saw. This led to huge advancements like the introduction of the Jumbo Jet which shocked the market (Passeri, 2013)
III. Significance of the Problem
The significance of the problem is the Rigid System implemented by the Civil Aeronautics Board favored the airline companies but the passengers were forced to pay escalating fares (Passeri). Congress was concerned that in the long term that airline travel would fall to the same path that railroads did, which resulted in the largest bankruptcy in history with the collapse of the Penn Central Railroad (Passeri).
IV. Development of Alternative