- Between 1937 and 1978, the US domestic airline industry was regulated as if it were a public utility. Interstate routes were regulated by the federal Civil Aeronautics Board (CAB), and intrastate routes (such as a flight from Sacramento to San Diego) were under the authority of state regulators. The CAB managed air travel in a manner superficially similar to the way Amtrak runs passenger rail traffic: some routes were operated at artificially high prices to subsidize the operation of others. The CAB was often criticized for being a slow, inefficient, and high-handed bureaucracy. They took years to review and approve or disapprove new routes, and generally frowned upon innovation.
- Over the four decades of the CAB regime, the air passenger business changed markedly. In 1937, the jet airliner didn't even exist. However, the 1970s were the heyday of the jumbo jet, with the Boeing 747 being introduced in 1970. The 1973 energy crisis and the 1970s era economic stagflation were in many ways comparable to the 2007-08 oil spike and the economic crisis that followed. These changes were coupled with a rising tide of conservative economic thinking to lead many to call for widespread deregulation in the US economy as an answer to economic woes, and made the airline industry a major target for deregulation.
- Although the issue had long been studied by preceding Republican administrations, it was Democratic President Jimmy Carter who took the initiative and made deregulation of the airline industry happen. The act called for the elimination of most economic-related restrictions on the airline industry within four years, but as it happened most of them were removed ahead of schedule under the Reagan Administration.
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Pan Am no longer exists.Deregulation led to a substantial upheaval in the airline industry. Many of the large, established airlines were in favor of the practices of the CAB, which while inflexible, guaranteed them a profit. Several major airlines went bankrupt, and heavyweights like Pan Am and TWA ceased to exist. However, deregulation also opened the door for a new breed of low-cost airlines, such as Southwest, to enter the market on a large scale and prosper. - Prior to the deregulation, most air traffic in the US was point-to-point. A "hub" was simply an airport that did a lot of business. In a quest for greater efficiency, the big airlines moved to the hub-and-spoke route system. Big aircraft were reserved for major long distance routes between hub airports, which would then devolve down to connections to secondary and tertiary locations on mid-sized and small aircraft. This was the dominant model until some of the low-cost airlines began returning to point-to-point air service for their most profitable, heavily trafficked routes.
- Studies have shown that airfares have dropped by 30 percent between 1978 and 1990, and then a further 25 percent between 1990 and 2000. In terms of sheer bargain value, airline deregulation delivered with substantially lower prices. However, many have come to compare flying in the United States to glorified bus service, and the difference in service quality between US airlines and their international competitors is marked. That at least some travelers are willing to pay a little more for moderately better conditions is exemplified by the growth in popularity of the Economy Plus class.
