Airline Deregulation

Airline Deregulation
Retrieved from: http://www.econlib.org/library/Enc/AirlineDeregulation.html

President Carter was who took the initiative and signed the Deregulation Act of 1978, whichradically changed the airline industry. Basically this act removed the authority of the Civil Aeronautics Board (CAB) over fares, routes and market entry and handled it to the discretion of theairlines. The Act, however, did not remove or reduce the regulatory powers of the Federal Aviation Administration (FAA) over all aspects of aviation safety.
The authors of this article makes a strongopening statement about how the U.S. deregulation “has been part of a greater global airline liberalization trend, especially in Asia, Latin America, and Europe”. I completely agree with this statement;although, in the European Union this process occurred almost 20 years later, it was not until 1996 that the first two low cost carriers emerged Easyjet and Ryanair. Both airlines borrow their businessmodel from United States carrier Southwest Airlines. The consolidation had its major milestones in the acquisition by Air France of KLM and its integration with Alitalia and Lufthansa on the purchaseof Swissair.
The airline deregulation led to a significant confusion in the airline industry. Many of the “legacy” airlines were in favor of the practices of the CAB, which at least guaranteed them aprofit. Several major airlines went bankrupt, and heavyweights like Pan Am and TWA ceased to exist. However, deregulation also opened the door for a new type of low-cost airlines, such as Southwest,to enter the market on a large scale and prosper. But, in order to take advantage of lower fares passengers must be well disposed to sacrifice their commodity for a cheap ticket.
The Authors alsomention the “Open Skies” agreement between United States and other countries. This agreement allows foreign airlines to operate air services from USA to any other country. Unfortunately the United...