About the Deregulation of Airlines
The deregulation of commercial airlines occurred with the passage of the Airline Deregulation Act of 1978. Most air travelers can thank this act for falling plane ticket prices since the 1980s.
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History
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Before the deregulation of the airline industry, the U.S. government controlled who could fly commercial routes, flight schedules and air fare through the Civil Aeronautics Board. Essentially, the U.S. government considered air travel a public service.
Function
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The lack of pricing authority by airlines in the 1970s was the major reason for deregulation, according to former U.S. Department of Transportation Undersecretary John W. Barnum. Plane ticket prices increased dramatically due to route inefficiencies and the mid-1970s oil crisis. Additionally, the airlines could not implement competitive pricing policies without government approval, which rarely happened.
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Effects
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Deregulation allowed the airlines of the 1970s to drop money-losing routes, usually those to smaller cities. Airlines adopted the "hub and spoke" model still in use today, according to the U.S. Centennial of Flight Commission. The hub and spoke model uses major cities as connections for most flights.
Price Drop
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Due to the ability of airlines to offer discount seating and set their own routes, the average plane ticket price dropped 44.9 percent between 1978 and 2008.
Considerations
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Deregulation saved fliers over $100 billion between 1977 and 1992, according to the U.S. Centennial of Flight Commission. However, most of the major airlines that operated at the time of deregulation experienced major losses shortly thereafter. In addition, smaller operations profited from the "hub and spoke" model by taking over most routes to smaller cities.
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References
- Photo Credit airplane image by Clarence Alford from Fotolia.com
