Airline Deregulation Act

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Signature of Jimmy Carter under the Airline Deregulation Act

The Airline Deregulation Act (ADA) is a US law that was passed on October 28, 1978 ( signed into law ). It was previously signed by then President Jimmy Carter . The purpose was to deregulate commercial air traffic, which was left to the laws of the market.

prehistory

Since 1938, the rules for domestic air transport have been established by the Federal Civil Aeronautics Board (CAB). This particular price, routes and flight schedules. It also promoted the cross-subsidization of more expensive long-haul flights to cheaper short-haul flights. Ultimately, the CAB had to ensure that all airlines were able to generate a reasonable return.

However, the CAB had a reputation for being a bureaucratic monster. Airlines had to accept long processing times when they applied for a new route or a ticket price change, which in the end was often not approved at all. World Airways wanted to introduce a cheap route from New York City to Los Angeles in 1967 . The CAB examined the application for a full six years - and in the end rejected it because it was “out of date” (“stale”). After eight years, Continental Airlines was finally able to introduce a flight connection from Denver to San Diego , but only after an American appeals court ordered the approval by the CAB.

This rigid system came under pressure in the 1970s. The 1973 oil crisis and economic stagnation changed the economic environment, as did technological progress, including the jumbo jet . Most airlines, which benefited from the quasi-guaranteed income, wanted to stick with the old system. On the other hand, the passengers and communities, who had to pay the more expensive prices, are different. The US Congress feared that a liberalization of the aviation market could have long-term ruinous consequences as was the case with the American railways, which partially collapsed in 1976.

consequences

A report by the Government Accountability Office in 1996 concluded that the average ticket price per passenger mile was 9 percent lower in 1994 than in 1979. Between 1976 and 1990, airfares fell by about 30 percent after adjusting for inflation . The load factor increased, partly because more functional aircraft were now being used: larger models on more frequented routes and smaller models on other routes.

Even so, not all routes benefited equally from this deregulation. Prices fell proportionally more on busy routes than on secondary routes.

However, this opening of the market also led to major financial losses for individual companies and conflicts with trade unions. Between 1978 and mid-2001, nine larger airlines (including Eastern , Midway , Braniff , PanAm , US Airways and TWA ) and 100 smaller companies went bankrupt or had to be liquidated. This also affected almost all of the dozen new societies that were only founded after deregulation. From mergers and acquisitions among surviving firms a club of the "big six" (Big Six) of Mega Airlines, which was oligopoly-like conditions created in many markets.

Disadvantages for peripheral regions have not come true to the extent that the law predicted. However - before the low-cost airlines emerged - the hubs of the major airlines were given preferential treatment and the remote airports were fed with smaller machines as feeders.

The general service of American airlines has declined. The emergence of low-cost airlines showed that there was a greater need for low prices rather than more convenience.

The increase in flight safety that has occurred since then is likely to be largely due to general technological progress and less to the introduction of this law.

The Airline Deregulation Act is considered to be the birth of revenue management .

literature