AIRLINE DEREGULATION

The Deregulation of the Airline Industry

The Deregulation of the Airline Industry

Introduction

In 1978, an Act called the Airline Deregulation Act was formed which transferred the control of the air travel to the market sphere from the political sphere. The previous company controlling the Airline was the Civil Aeronautics Board (CAB). CAB controlled the consumer issues, mergers, inter-carrier agreements, exit, entry and price of the services of the airline. CAB officially expired in 1984 under the CAB Sunset Act. The air travel economic liberalization was a part of the deregulation move which was based on the increasing realization, that an economy which was politically controlled, had no public interest (Dempsey, 1989).

Airline Deregulation

The deregulation of the airline was a monumental event. It had a deep effect on the industry and the consumer. The impact is still felt even today, as Low-Cost Carriers (LCCs) challenged the heritage airlines which already existed before the airline deregulation (Delta, US Air, Northwest, Continental, United, and American). Undeniably, the industry of airlines experienced a shift in the paradigm which reflected the continuing deregulation effect. Even though, the deregulation had an effect on the air travelling flow, the grid of the infrastructure remained an issue for the government controlled and economic distortion. Therefore, the airlines were merely deregulated partially (Dempsey, 1989).

Problems faced by the Industry after Deregulation

Even though, there were substantial profits of the economic liberalization, the industry was plague by the fundamental problems. As there was a 40% drop in the airfares, there was also a 40% drop in the income of the employees and workers of the airlines due to the deregulation. Before the deregulation, the capital income of the airlines was massive and as per the Railway Labor Act (RLA), the salaries and benefits of the workers were properly given. Facilities including education, leaves and bonuses ...