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Airline Deregulation Act

The Airline Deregulation Act (ADA) was a piece of US legislation signed into law on October 28, 1978.

The main purpose of the act was to remove government control and open the deregulated passenger air transport industry to market forces. Prior to the act the federal Civil Aeronautics Board[?] (CAB) regulated all domestic air transport, controlling fares and setting routes and schedules. The CAB was tasked to promote air travel, and due to their beliefs they held fares down in the short-haul market and let them be higher in the long-haul market. The CAB was also obliged to ensure that the airlines had a reasonable rate of return.

In Congress and elsewhere there arose the belief that the CAB was in fact inhibiting growth and encouraging inefficient practices. The factors that led to this belief were centred on the increased fares and capacity moratorium following the oil price increases and the inflation of 1973 - this led to public dissatisfaction. The intention of the ADA was that with market forces determining the price, quantity, and quality of domestic air service there would be a reduction in long-haul fares, lower barriers to entry for new airlines and the increased use of different aircraft for different roles (turboprop vs. jet engine). Air cargo had been deregulated in 1977.

The act intended for the restrictions 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. The actual changes were implemented rather more rapidly.

Restrictions remained in place on international air transport and a number of the functions of the CAB were passed to the DOT[?]. The DOT could grant antitrust immunity and was obliged to ensure that smaller communities still received air links (Essential Air Service program) by offering subsidies. Safety remained in the hands of the Federal Aviation Administration.

For the consumer a GAO report in 1996 found that the average fare per passenger mile was about 9 percent lower in 1994 than in 1979. In terms of the airlines the business environment was rather more harsh - since 1978 (and prior to 2001) nine major carriers (including Eastern Airlines, Midway, Pan American, Continental, America West, and TWA) and over 100 smaller airlines have gone bankrupt, although the total number of carriers had almost doubled by 1996 and there was increased competition in certain markets. There was also a flurry of mergers and acquisitions, creating a number of 'mega-carriers' and oligopolistic conditions. The airlines also developed much more obvious hub-and-spoke systems, to maximise the efficient use of aircraft over a point-to-point transit system. Increases in the average level of safety are often attributed to the ADA, but as safety regulations remained enforced and based on the technological improvement of aircraft and ATC over time such claims are specious.



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