[Author’s Name]
[Institution’s Name]
Essay on Airline Deregulation
Since 1938, 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 was also obliged to ensure that the airlines had a reasonable rate of return. 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 U.S. Court of Appeals ordered the CAB to approve the application.
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 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 massive taxpayer bailout in 1976.
In 1975 the United States Senate Judiciary Committee began hearings on airline deregulation; it was deemed a friendlier forum than the more appropriate place, the Aviation Subcommittee of the Commerce Committee. Airlines' dire predictions of a post-deregulation world were mitigated by the experience of....
