Airline Deregulation: Success Or Failure? Essay

1284 words - 5 pages

Shortly after World War I, the U.S. Government discovered the abilities of the modern airplane and created the idea of utilizing aircraft to transport mail across the country. In 1917, Congress approved funding to experiment with the idea of delivering mail by air. By 1920, the Post Office was delivering mail across the entire country, eliminating over 22 hours in delivery times of a coast-to-coast route. With the success of the airmail service and the growing popularity of civil aviation, the U.S. Government recognized the need to develop set standards for civil aviation and in 1926 created the Air Commerce Act of 1926. The Air Commerce Act of 1926 called for the government to regulate air routes, navigation systems, pilot and aircraft licensing and investigation of accidents. The act also controlled how airlines were compensated for mail delivery. Later in 1930, Postmaster General Walter Brown made recommendations which were later known as the Watres Act which consolidated airmail routes and opened the door for longer-term contracts with the airlines. Brown handled the situation regarding new contracts poorly by only inviting a hand selected list of large airlines to the negotiation table. This move pushed smaller airlines to complain and the issue was pushed to Congress. Following congressional hearings President Roosevelt later decided Brown’s scandal was too much to deal with and canceled all mail contracts completely and handed over air mail delivery responsibility to the U.S. Army. That decision was a disaster, and one month later, air mail was handed back over to the private sector. This time, however contract bidding was more structured and fair to all. It was then clear that the airline industry was back in full swing, through government regulation.

Roughly a decade later, the airlines were struggling to turn a profit due to the previous mail rate negotiations. They were also being controlled and regulated through numerous government organizations, causing several conflicts between groups. The Civil Aeronautics Act of 1938 was then established to form a centralized government organization. The Civil Aeronautics Authority was formed for the purpose to regulate air mail rates, passenger air fares, airline mergers and routes. At the time, this act stabilized the industry and held rates to a manageable level enabling the airline industry to continue to prosper.
With the Civil Aeronautics Board (CAB) controlling rates and fares, airlines had to find new ways to stay competitive. Shortly after airlines found stability in transferring mail, the public found more acceptance in aviation and bulk passenger travel took over as the airlines primary income. Since fares were set by the CAB, airline competition was at the service level. Empty seats, abundance of leg room, hot meals, piano bars and other service enhancements were introduced as a way to gain and maintain customers. Of course this service was not cheap, nor was the price of the...

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