Airline Deregulation Act
The Airline Deregulation Act is a federal law that deregulated the airline industry in the United States in 1978. This law is removing the government control over areas such as fares, routes and new airliners that entered to the market. The airliners had the freedom to compete prices in the free market, which in-turn reduced prices that greatly benefits the flying public. The deregulation act had prolonged effect as it created more jobs and businesses, and improved operating efficiency.
The problem caused by the deregulation act is the decrease in the number of flights in the less profitable routes. This led to an issue of congestion at busy airports.
Significance of the Problem
Without the Civil Aeronautics Board and with the new Airline Deregulation Act into play, there was no more regulation. Quickly and as expected, airlines abandoned the less profitable routes to increase profits. An example would be the town of Bakersfield, CA, a town that was frequently a stop for aircrafts. However, without regulation, the airlines pulled out of the town and thus deprived the city of flights to bigger cities. Now because of this negative externality, the government would have to subsidize airlines to encourage them to do what they had been doing under the Civil Aeronautics Board. Another harmful effect that developed was that new airlines seeking to enter the market did not have to agree to demands of larger and established airlines. A prime example would be the People’s Express, an airline founded by Donald Burr, a man who utilized quite unorthodox techniques. He was able to keep his costs low by offering low pay and hiring multitasking personnel. However, despite the low costs, he did not offer commodities to his customers. Nevertheless, the prices were low, so low that that it competed with those of larger airlines. Almost inevitably, the People’s Express closed as it could not sustain its competition as it could not compete in the sector of service. Also, without regulations by the Civil Aeronautics Board, airlines were free to crowd its airports which put safety at risk.
Development of Alternative Actions
Alternative Action 1. The government should take control of the airline routes and make sure that every request from the airlines to a new route is processed and approved as soon as possible.
Advantages. This will reduce the congestion at busy airport and more routes will be provided to smaller cities.
Disadvantages. Regulating the routes may lead to increase in cost of flights by the airlines in smaller and less profitable routes.
Alternative Action 2: A revised airline regulation should be implemented with new governance policy.
Advantages. This will ensure that all the routes are covered and reduce airport congestion.
Disadvantages. This might reduce the number of passengers using airplanes.
Since the air traffic is increasing day by day and people travelling through flight has been increased at this situation its recommended government to take the control of the airline routes and regulate the fare at the same time, they need to focus on new governance policy and regulations to the Civil Aeronautics Board.
Airline Deregulation Act