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Essay on The Effect Of Airline De-Regulation
Airline De-regulation: An Introduction
In 2005 it has been 26 years of airline deregulation in the United States. By coincidence we can also celebrate 67 years of airline regulation and 47 years of airline reregulation. In 1938, when the Civil Aeronautics Act was passed, there were 16 trunk airlines in the United States. "Trunk" was the generic name for the common carriers that provided scheduled national and international air service.
Government assistance through protection, subsidy, promotion and regulation was thought to be crucial to permit the new industry to develop. For example, at that time the railroads were still the dominant form of both passenger and freight transportation, so railroads were specifically forbidden to have a financial interest in an airline. The fear was that the then very rich and powerful railroads would overpower the competition from the fledgling airline industry, just as decades before in the Panama Canal Act the railroads were forbidden to have in interest in competing water carriers, for fear that the railroads would start cut throat competition on the high seas for traffic between the East and West Coasts of the United States, thereby dooming the feasibility of the Panama Canal.
The Congress created a new government agency, the Civil Aeronautics Authority, to regulate air carriers the same way that the Interstate Commerce Commission had regulated surface carriers since 1890, that is, as if they were public utilities. The CAA was authorized to issue certificates to provide air service between specific points and to approve all fares and schedules.
Twenty years later, in 1958, Congress brought air carrier regulation into the post-war world-a world where aviation was already a huge industry in the United States. By chance, 1958 was also the beginning of the jet era, which was soon to change the game materially.....
