The History of Airline (De)Regulation In The United States

John McDermott

Airlines such as Southwest own their success to the deregulation of the airline industry. One of their 737-500s is pictured here in 1994. Photo Credits: Wikimedia Commons / Jon Proctor

This article is part of a series that examines airline regulation, culture, and business in the United States and around the world. Check back for more articles each week on new topics, and reach out to our team at layoverhub@gmail.com with ideas, tips, or updates.

Airlines are one of the most visible parts of our daily lives. We fly on carriers such as American Airlines, Delta Airlines, United Airlines, JetBlue, and Southwest Airlines to get to business meanings, visit family reunions, or experience relaxing vacations across the United States and around the world. Long TSA lines, long delays, flight cancellations, and law enforcement encounters leave us wondering more about how long it will take to reach our destination, instead of how the vast and complicated airline industry works in the U.S. Since its humble beginnings in 1914, the airline industry has grown massively in the U.S. The exponential growth has made the U.S. industry the largest in the world. And, just like any other industry, airlines have a complicated history of regulation and deregulation. This article explores the evolution of airline regulation in the U.S. and how federal regulations affect the airline industry today.

JetBlue is an American low-cost airline.
Photo Source: TravelSkills / Jim Glab

The first airline regulation in the U.S. came in the form of the Air Mail Act of 1925. This act, passed on February 2 of 1945, allowed air mail routes to be independent of the U.S. post office for up to four years.

Additional regulation act came in the form of the Air Commerce Act of 1926. This Act organized federal regulations of aircraft, airmen, navigational facilities, air traffic, and more. The Act required that aircraft be inspected on a regular basis, and that aircraft displayed markings for identification. It also required that pilots be tested on aeronautical knowledge, and that they have physicals completed to ensure their physical fitness and ability to fly.

The Air Commerce Act also made the federal government responsible for advancing air commerce, establishing airways, establishing aids to air navigation, and enforcing safety rules and standards. New regulations and additional government funding to airlines ensured that routes would become safer during both day and night.

In 1938, the Civil Aeronautics Board (CAB) was formed to increase regulations on airlines. The CAB regulated most of what the consumer saw in regards to airlines. The duties of the CAB were to award new routes to airlines, limit the entry of airlines into new markets, regulate the schedules that routes were flown on, and regulate the fares that passengers could pay. In other words, the CAB regulated the routes that airlines could fly, the fares that airlines could charge for flights, the schedules that routes were flown on, and which foreign destinations U.S. airlines could fly to.

The CAB didn’t only regulate air travel. It also served duties such as air accident investigation. However, this job was eventually transferred over to the National Transportation Safety Board (NTSB). The CAB merged with the Air Safety Board in 1940.

What might be the largest U.S. regulation shift came in 1978 with the Airline Deregulation Act. As its name implies, this act aimed to deregulate the airline industry in the United States. The Act prevented the U.S. government from controlling fares, routes, market entries, and flight schedules. This allowed airlines to increase the number of routes they flew, charge competitive prices, and enter foreign markets that were once dominated by Pan American World Airways.

U.S. President Jimmy Carter signs the Airline Deregulation Act into effect. Photo Source: Wikipedia

However, the Airline Deregulation Act didn’t completely separate the U.S. Government from airlines. The FAA still regulates aviation safety. For example, they still require pilots to complete physical exams every six months, and they still make sure that pilots and flight attendants are up to date on all the recent safety and emergency response features of the aircraft that they fly. Airlines are still required to inspect aircraft regularly, and identification is still required.

The Federal Aviation Administration regulates safety measures on airplanes.
Photo Source: @FAANews / Twitter

The Act had goals including maintaining safety has a high priority in air commerce; placing “maximum reliance” on competition for providing air transportation services; and the “avoidance of unreasonable industry concentration” which could allow for certain airlines to drive up prices and form a monopoly; among other things.

In retrospect, The Airline Deregulation Act changed the U.S. aviation industry for the better. The Act played a large part in putting consumers at the forefront of the airline industry. In 1996, a report revealed that, on average, airline fares per passenger mile were 9% lower than they had been in 1979. People were able to fly more easily in the 1990s than they had in the 1970s because airlines could move larger aircraft to busy routes more easily without strict government regulation. The rise of low-cost airlines like Southwest and JetBlue have allowed the point-to-point model of flying to become more prominent than the once-popular hub-and-spoke model, which was more economically viable under heavy government regulation. The point-to-point model allowed passengers to reach small vacation destinations quickly and cheaply without having to go through a major hub, drive to the destination, or not go at all.

This diagram compares the Point-to-Point model with the Hub-and-Spoke model.
Photo source: Douglas Green Associates, Inc / Blogger

Without the Airline Deregulation Act, the U.S. airline industry would be very different. Airline prices would be higher than they are today due to low competition. Only four or five major airlines would exist in the United States, and only one or two of them would be able to fly to popular international destinations. This was exemplified by Pan Am’s virtual monopoly on flights into and out of the U.S. during the mid 20th century. Airlines wouldn’t have to worry about customer service as much as they do today, as government regulation would ensure that customers continued to fly with them; there would be no other options. Overall, the Airline Deregulation Act was a very beneficial Act that has changed an industry and a culture for better.

The Airline Deregulation Act has shaped the airline industry we know today. We can get on any major airline from around the world and fly to almost every country we want, at any time we want. Fares are cheap, oil prices are low, and we can see more of the world than we ever could before. Aviation has reached an all time high, and as long as it is left alone to keep growing, there is no limit as to how far it can go.

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