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Encyclopedia > Airline Deregulation Act
President Jimmy Carter signs the Airline Deregulation Act.

The Airline Deregulation Act (or ADA) was a United States federal law signed into law on October 24, 1978. The main purpose of the act was to remove government control from commercial aviation and expose the passenger airline industry to market forces. Jimmy Carter signs the Airline Deregulation Act of 1978. ... Jimmy Carter signs the Airline Deregulation Act of 1978. ... For other persons named Jimmy Carter, see Jimmy Carter (disambiguation). ... The United States Code (U.S.C.) is a compilation and codification of the general and permanent federal Law of the United States. ... is the 297th day of the year (298th in leap years) in the Gregorian calendar. ... Year 1978 (MCMLXXVIII) was a common year starting on Sunday (link displays the 1978 Gregorian calendar). ... Passengers carried by civil aviation in 2003 Commercial aviation is the part of civil aviation (both general aviation and scheduled airline service) that involves operating aircraft for hire. ... An Airbus A380 of Emirates Airline An airline provides air transport services for passengers or freight. ...

Contents

History of airline regulation and the CAB

Since 1937, the federal Civil Aeronautics Board (CAB) had regulated all domestic air transport as a public utility, setting fares, routes, and schedules. The CAB promoted air travel, for instance by generally attempting to hold fares down in the short-haul market, to be subsidized by higher fares in the long-haul market. The CAB also was obliged to ensure that the airlines had a reasonable rate of return. Governments have played an important part in shaping air transportation. ... Aviation or Air transport refers to the activities surrounding mechanical flight and the aircraft industry. ... A public utility is a company that maintains the infrastructure for a public service. ... This article or section does not cite any references or sources. ...


It also earned a reputation for bureaucratic complacency; airlines were subject to lengthy delays when applying for new routes or fare changes, which were not often approved. World Airways applied to begin a low-fare New York City to Los Angeles route in 1967; the CAB studied the request for over six years only to dismiss it because the record was "stale." Continental Airlines began service between Denver and San Diego after eight years only because a United States Court of Appeals ordered the CAB to approve the application. World Airways is an American non-scheduled airline currently headquartered in Peachtree City, Georgia. ... New York, New York and NYC redirect here. ... Flag Seal Nickname: City of Angels Location Location within Los Angeles County in the state of California Coordinates , Government State County California Los Angeles County Mayor Antonio Villaraigosa (D) Geographical characteristics Area     City 1,290. ... Continental Airlines (NYSE: CAL) is a U.S. certificated air carrier. ... Nickname: Location of Denver in the State of Colorado Location of Colorado in the United States Coordinates: , Country United States State State of Colorado City and County Denver[1] Founded 1858-11-22, as Denver City, K.T.[2] Incorporated 1861-11-07, as Denver City, C.T.[3] Consolidated... Flag Seal Nickname: Americas Finest City Location Location of San Diego within San Diego County Coordinates , Government County San Diego Mayor City Attorney         City Council District One District Two District Three District Four District Five District Six District Seven District Eight Jerry Sanders (R) Michael Aguirre Scott Peters Kevin... The United States courts of appeals (or circuit courts) are the mid-level appellate courts of the United States federal court system. ...


This rigid system encountered tremendous pressure in the 1970s. The 1973 energy crisis and stagflation radically changed the economic environment, as did technological advances such as the jumbo jet. Most of the major airlines, whose profits were virtually guaranteed, favored the rigid system. But passengers forced to pay escalating fares did not, nor communities which subsidized air service at ever-dearer rates. Congress became concerned that air transport in the long run might follow the nation's railroads into trouble; in 1970 the Penn Central Railroad had collapsed in what was then the largest bankruptcy in history, resulting in a huge taxpayer bailout in 1976. (Redirected from 1973 energy crisis) United States, drivers of vehicles with odd numbered license plates were allowed to purchase gasoline only on odd-numbered days of the month, while drivers with even-numbers were limited to even-numbered days. ... Stagflation, a portmanteau of the words stagnation and inflation, is a term in general use within modern macroeconomics used to describe a period of out-of-control price inflation combined with slow-to-no output growth, rising unemployment, and eventually recession. ... The European Airbus A380 is the worlds largest and broadest passenger aircraft A wide-body aircraft is a large airliner with a fuselage diameter of 5 to 6 metres (16 to 20 ft). ... Type Bicameral Houses Senate House of Representatives President of the Senate President pro tempore Dick Cheney, (R) since January 20, 2001 Robert C. Byrd, (D) since January 4, 2007 Speaker of the House Nancy Pelosi, (D) since January 4, 2007 Members 535 plus 4 Delegates and 1 Resident Commissioner Political... To meet Wikipedias quality standards, this article or section may require cleanup. ... The Penn Central Transportation Company, normally called Penn Central, was an American railroad company, headquartered in Philadelphia, Pennsylvania and formed by the merger on February 1, 1968 of the Pennsylvania Railroad and the New York Central Railroad; the New Haven was added to the merger at the insistence of the... Notice of closure stuck on the door of a computer store the day after its parent company, Granville Technology Group Ltd, declared bankruptcy (strictly, put into administration—see text) in the United Kingdom. ...


Leading economists had argued for several decades that this sort of regulation led to inefficiency and higher costs. In 1970-71 the Council of Economic Advisors in the Richard Nixon Administration, along with the Antitrust Division of the Department of Justice and other agencies, proposed legislation which would diminish price collusion and entry barriers in rail and truck transportation. While this initiative was in process, in the follow-on Gerald Ford Administration, the United States Senate Judiciary Committee, which had jurisdiction over the antitrust laws, a part of competition law, began 1975 hearings on airline deregulation. Senator Ted Kennedy took the lead in these hearings. This committee was deemed a more friendly forum than what likely would have been the more appropriate venue, the Aviation Subcommittee of the Commerce Committee. The Gerald Ford Administration supported the Senate Judiciary Committee initiative. The Council of Economic Advisers is a group of economists set up to advise the President of the United States. ... Nixon redirects here. ... Price fixing is an agreement between business competitors to sell the same product or service at the same price. ... For other persons named Gerald Ford, see Gerald Ford (disambiguation). ... The U.S. Senate Committee on the Judiciary (informally Senate Judiciary Committee) is a standing committee of the United States Senate, the upper house of the United States Congress. ... Antitrust redirects here. ... Deregulation is the process by which governments remove, reduce, or simplify restrictions on business and individuals in order to (in theory) encourage the efficient operation of markets. ... For other persons named Ted Kennedy, see Ted Kennedy (disambiguation). ... The Senate Committee on Commerce, Science, and Transportation is a standing committee of the United States Senate in charge of all senate matters related to the following subjects: Coast Guard Coastal zone management Communications Highway safety Inland waterways, except construction Interstate commerce Marine and ocean navigation, safety, and transportation Marine... For other persons named Gerald Ford, see Gerald Ford (disambiguation). ...


In 1977, President Jimmy Carter appointed Alfred E. Kahn, a professor of economics at Cornell University, to be chair of the CAB. A concerted push for the legislation had developed, drawing on leading economists, leading 'think tanks' in Washington, a civil society coalition advocating the reform (patterned on a coalition earlier developed for the truck-and-rail-reform efforts), the head of the regulatory agency, Senate leadership, the Carter Administration, and even some in the airline industry. This coalition swiftly gained legislative results in 1978. For other persons named Jimmy Carter, see Jimmy Carter (disambiguation). ... Alfred E. Kahn is the Robert Julius Thorne Professor, Emeritus, of Political Economy at Cornell University. ... Face-to-face trading interactions on the New York Stock Exchange trading floor. ... Cornell redirects here. ...


Dan Mckinnon would be the last Chairman of the CAB and would oversee its final closure on January 1, 1985. is the 1st day of the year in the Gregorian calendar. ... This article is about the year. ...


Legislative terms

Senator Howard Cannon of Nevada introduced S 2493 on February 6, 1978. It passed and was signed by Carter, becoming Pub.L. 95-504 on October 24, 1978. Howard Walter Cannon (January 26, 1912–March 5, 2002) was an American politician. ... This article is about the U.S. State of Nevada. ... is the 37th day of the year in the Gregorian calendar. ... Year 1978 (MCMLXXVIII) was a common year starting on Sunday (link displays the 1978 Gregorian calendar). ... This article or section does not adequately cite its references or sources. ... is the 297th day of the year (298th in leap years) in the Gregorian calendar. ... Year 1978 (MCMLXXVIII) was a common year starting on Sunday (link displays the 1978 Gregorian calendar). ...


The stated goals of the Act included

  • 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 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. is the 365th day of the year (366th in leap years) in the Gregorian calendar. ... AUGUST 25 1981 US Marine Sean Vance is Born on the 25th of August {ear nav|1981}} Year 1981 (MCMLXXXI) was a common year starting on Thursday (link displays the 1981 Gregorian calendar). ... is the 1st day of the year in the Gregorian calendar. ... For the Jimi Hendrix song, see 1983. ...


Among its many terms, the Act:

  • gradually eliminated the CAB's authority to set fares;
  • required the CAB to expedite processing of various requests;
  • liberalized standards for the establishment of new airlines;
  • allowed airlines to take over service on routes underutilized by competitors or on which the competitor received a local service subsidy;
  • authorized international carriers to offer domestic service;
  • placed the evidentiary burden on the CAB for blocking a route as inconsistent with "public convenience";
  • prohibited the CAB from introducing new regulation of charter trips;
  • terminated certain subsidies for carrying mail effective January 1, 1986 and Essential Air Service subsidies effective 10 years from enactment;
  • terminated existing mutual aid agreements between air carriers;
  • authorized the CAB to grant antitrust immunity to carriers;
  • directed the Federal Aviation Administration (FAA) to develop safety standards for commuter airlines;
  • authorized intrastate carriers to enter into through service and joint fare agreements with interstate air carriers;
  • required air carriers, in hiring employees, to give preference to terminated or furloughed employees of another carrier for 10 years after enactment;
  • gradually transferred remaining regulatory authority to the U.S. Department of Transportation (DOT), and dissolved the CAB itself.

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 concerning air safety and any implications deregulation would have in that matter. A charter airline is one that operates charter flights, that is flights that take place outside normal schedules, by a hiring arrangement with a particular customer. ... is the 1st day of the year in the Gregorian calendar. ... Year 1986 (MCMLXXXVI) was a common year starting on Wednesday (link displays 1986 Gregorian calendar). ... Essential Air Service (EAS) is a U.S. government program enacted to guarantee that small communities in the United States, which, prior to deregulation, were served by certificated airlines, maintained commercial service. ... This article is about anti-competitive business behavior. ... FAA redirects here. ... A Commuter airline is an airline that flies to smaller communities, often linking smaller communities to a larger regional hub. ... The United States Department of Transportation (DOT) is a federal Cabinet department of the United States government concerned with transportation. ... Seal of the United States Department of Transportation The United States Secretary of Transportation is the head of the United States Department of Transportation. ... Air safety is a broad term encompassing the theory, investigation and categorization of flight failures, and the prevention of such failures through appropriate regulation, as well as through education and training. ...


Effects

A 1996 Government Accounting Office report found that the average fare per passenger mile was about 9% lower in 1994 than in 1979. Between 1976 and 1990 the paid fare had declined approximately 30% 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 benefits of deregulation have not been distributed evenly throughout the national air transportation network. Costs have fallen more dramatically on heavily trafficked, longer-distance routes than on shorter, lighter ones.


Exposure to competition led to heavy losses and conflicts with labor unions at a number of carriers. Between 1978 and mid-2001, nine major carriers (including Eastern, Midway, Braniff, Pan Am, Continental, America West Airlines, and TWA) and more than 100 smaller airlines went bankrupt or were liquidated—including most of the dozens of new airlines founded in deregulation's aftermath. The Lawrence textile strike (1912), with soldiers surrounding peaceful demonstrators A trade union or labor union is an organization of workers who have banded together to achieve common goals in key areas such as wages, hours, and working conditions, forming a cartel of labour. ... This article is about the defunct U.S. air carrier Eastern Air Lines. ... This article is about the Midway Airlines that operated from 1976 to 1991. ... Braniff International Airways was an American airline that existed from 1928 until 1982. ... Pan Ams seaplane terminal at Dinner Key in Miami, Florida, was a hub of inter-American travel during the 1930s and 1940s. ... Continental Airlines (NYSE: CAL) is a U.S. certificated air carrier. ... America West Airlines was one of the United States ten major airlines. ... Trans World Airlines (IATA: TW, ICAO: TWA, and Callsign: TWA), commonly known as TWA, was an American airline company that was acquired by American Airlines in April 2001. ...


For the most part, smaller markets did not suffer the erosion of service predicted by some opponents of deregulation. However, until the advent of low-cost carriers, point-to-point air transport declined in favor of a more pronounced hub-and-spoke system. The larger hubs were served with larger aircraft, the spokes with smaller. While more efficient for serving smaller markets, this system has enabled some airlines to drive out competition from their "fortress hubs." The growth of low-cost carriers such as Southwest Airlines has brought more point-to-point service back into the United States air transport system, and contributed to the development of a wider range of aircraft types that are better adaptable to markets of varying sizes. A Ryanair Boeing 737-800 A low-cost carrier or low-cost airline (also known as a no-frills or discount carrier / airline) is an airline that offers generally low fares in exchange for eliminating many traditional passenger services. ... The Spoke-hub distribution paradigm (also known as a hub and spoke model or hub and spoke network) derives its name from a bicycle wheel, which consists of a number of spokes extending outward from a central hub. ... This article is about the American airline. ...


References

  • Barnum, John W. "What Prompted Airline Deregulation 20 Years Ago?," Presentation to the Aeronautical Law Committee of the Business Law Section of the International Bar Association, September 15, 1998.
  • Derthick and Quirk, The Politics of Deregulation, Brookings Institution, 1985.
  • Kahn, Alfred E. "Airline deregulation" in Concise Encyclopedia of Economics.
  • Robyn, Dorothy, Braking the Special Interests, University of Chicago Press, 1987
  • Rose, Seely and Barrett, 'The Best Transportation System in the World,'University of Ohio Press, 2006, a part of sn Historical Series on Business Enterprise, edited by Blackford and Kerr.
The International Bar Association is an international professional body of lawyers who, in some jurisdictions, are responsible for the regulation of the legal profession. ... is the 258th day of the year (259th in leap years) in the Gregorian calendar. ... Year 1998 (MCMXCVIII) was a common year starting on Thursday (link will display full 1998 Gregorian calendar). ...

  Results from FactBites:
 
Airline Deregulation Act - Wikipedia, the free encyclopedia (1190 words)
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.
Deregulation has in many cases led to predatory pricing and other anti-competitive behavior, and to airlines overextending themselves financially; several bankruptcies and takeovers of airlines in the years following deregulation may be attributable to this.
Another common anti-competitive practice of major airlines is to charge substantially less for a round trip on a given itinerary than for a one-way trip, or to charge substantially more for a given segment of a multi-segment itinerary than for the complete itinerary, which constitutes a form of tying.
Lessons of Airline Deregulation (1627 words)
The driving force behind deregulation was the perception that regulation by the CAB had resulted in reduced competition and higher fares.
The best argument against deregulation was that proper administration and/or reform of the existing law could cure the regulatory excesses of that period, the classic baby-but-not-the-bathwater formulation.
Indeed, the ability of airlines to discriminate by time of purchase, conditions of travel and, significantly, the degree of competition faced in each city-pair market, has been both the major impetus for lower average fares and the major source of most complaints about deregulation.
  More results at FactBites »

 
 

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