Deregulation Of The Airline Industry A Complete Study Of The Changing Trends Of The Airline Industry And The Deregulation Affects.

2301 words - 9 pages

Deregulation in the airline IndustryThe deregulation of air traffic discipline has lead to an increase in competition as well as an overall increase in air traffic on a worldwide scale. In Europe the airline liberalisation has been more gradual than that of the United States though the effects have been more or less the same. The increased power for airlines has expanded their freedom of operations. Also the numeral entrants have received new opportunities to operate globally. The benefits gained from air traffic liberalisation have been manifold, however there are several problems that have aroused discussion. The worldwide congestion is increasing and especially in Europe the congestion and the lack of airport capacity have become an acute problem. There are no easy solutions to the congestion problems and as the air traffic growth in Europe is expected to double by the year 2007, this will inevitably aggravate the problem. In this essay the attempt is to present the current problems as well as positive points concerning de-regulation as well as acknowledge congestion problems.From 1938 to 1978, decisions regarding airline service and fares were made by five presidential appointees on the now abolished Civil Aeronautics Board (CAB). Created to help protect the public and maintain order in the rapidly growing field of commercial aviation, the CAB was launched.As airline regulation evolved, the carriers were treated like regulated utilities. The CAB became a textbook case of how the regulatory process can overwhelm substance and how regulation protected the airlines from competition at the expense of consumers and competitors. The CAB would hold extensive and elaborately-staged hearings on nearly every single request regarding routes or prices, including requests by existing andnew carriers to start additional services between two given cities. More often than not, requests to establish new routes were denied or approved with restriction.The process was clearly expensive and time-consuming.Often the CAB was making decisions with their mystique of expertise and specialized knowledge. But many decisions in fact were arbitrary. The staff would often struggle to craft an order that presented a plausible rationale for some position the board had reached for reasons that had nothing to do with economic or regulatory theory.That regulatory process provided little incentive for airline executives to seek better, less costly ways to serve consumers. Regulators and executives spent time and energy on hundreds of petty issues, for example, whether the CAB would allow the employees of two affiliated airlines to wear similar uniforms.The CAB was the sole determiner of airline costs allowable for calculating fare levels and, therefore, fare levels themselves. Things were not well...In April 1976 when the CAB unanimously announced its support for deregulation, thereby triggering its own abolition. In a 180-degree turnaround, policymakers came to agree that the...

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