Airline Deregulation

airline industry

airline industry, the business of transporting paying passengers and freight by air along regularly scheduled routes, typically by airplanes but also by helicopter.

Ferdinand Graf von Zeppelin set up the first commercial airline in 1912, using a form of the dirigible to transport more than 34,000 passengers before World War I. Early air travel began with balloons (first flown by two Frenchmen in 1783), gliders (first flown in 1809), and ultimately airplanes (a Frenchman Clement Ader, flew his steam-powered plane, the Eole, in 1890). Prior to World War I, the public's interest in flying was peaked by demonstrations and airplane races; during the war, government subsidies and demands for new airplanes vastly improved techniques for designing and building them. Following the war, the first commercial airplane routes were set up in Europe, using wartime pilots and decommissioned war planes—often passengers were seated in chairs set up in old bombers. During the 1920s, European governments heavily subsidized the establishment of such well-known commercial airlines as British Airways, Air France, and KLM.

In the United States, commercial airlines developed more slowly. The U.S. Post Office established an air mail service in 1919 and played an important role in developing air travel by setting up a nationwide system of airports. In 1925 the U.S. government began paying generous subsidies to private carriers to deliver the mail, and some companies began hauling passengers as well. Many well-known U.S. carriers were established during this period, including Pan Am (founded in 1928; now defunct), United Airlines (created in 1931 by a merger between several older mail carrying operations), American Airlines (created in 1930 out of several mail carriers), TWA (1928; now merged with American), and Delta (1929).

Public interest in air travel grew after Charles A. Lindbergh's transatlantic flight (1927). Improved air safety and Boeing's and Lockheed's decision to produce airplanes that were especially designed for commercial airlines helped the number of passengers grow from only a few thousand a year in 1930 to about 2 million in 1939 and 16.7 million in 1949. The introduction of jet airplanes in 1957 and increasingly larger aircraft helped lower the cost of air travel in subsequent years. To regulate the industry, the Civilian Aeronautic Board was established in 1938 with the authority to establish routes, fares, and safety standards.

The Airline Deregulation Act of 1978 allowed airlines to set their own routes and after 1982 let them set their own fares. In 1984 the CAB was abolished; the Federal Aviation Administration now regulates airline safety. Lower fares and greater competition increased the number of passengers from 297 million in 1980 to over 455 million in 1988, producing complaints about congestion and safety. Financial problems in the 1980s after deregulation of the industry led to a period of labor strife. A number of major carriers were either bought by other airlines or forced out of business, and small start-up airlines began serving niche markets.

The industry continued to grow through the 1990s; in 1998, U.S. airlines carried a record 551 million passengers, but the 10 largest carriers now control about 96% of the U.S. market. The 2001 terrorist attacks on the World Trade Center and Pentagon, in which four jetliners were hijacked and intentionally crashed, threw the airline industry into turmoil, especially in the United States, as people avoided flying and new security restrictions made travel more difficult. Tens of thousands of employees were laid off, many flights were dropped, and Congress passed a $15 billion bailout package that ultimately had only a limited effect.

Two major airlines, US Airways and United, filed for bankruptcy in 2002, but this was due only in part to the events of Sept., 2001; US Airways, which had emerged from bankruptcy, filed again in 2004. Higher fuel costs and competition from newer airlines contributed to the Sept., 2005, decision by Delta and Northwest airlines to file for bankruptcy, creating a situation in which three of the top four U.S. airlines (by revenue) were in bankruptcy protection. US Airways emerged from bankruptcy the same month and merged with America West; United emerged in 2006. In 2007 Delta and Northwest exited bankruptcy; the two subsequently merged (2008), with only the Delta name surviving by 2010. That year, United and Continental agreed to merge under the United name. In 2011 American Airlines filed for bankruptcy; it had been the only major U.S. airline that had not done so in the years after the 2001 attacks.

See A. Sampson, Empires of the Sky (1984); R. Dooanis, Flying Off Course (1991).

The Columbia Encyclopedia, 6th ed. Copyright© 2013, The Columbia University Press.

Selected full-text books and articles on this topic

Airline Deregulation and Laissez-Faire Mythology
Paul Stephen Dempsey; Andrew R. Goetz.
Quorum Books, 1992
Legal Turbulence: The Courts's Misconstrual of the Airline Deregulation Act's Preemption Clause and the Effect on Passengers' Rights
Rosenthal, Daniel H.
Duke Law Journal, Vol. 51, No. 6, April 2002
Instead of Regulation: Alternatives to Federal Regulatory Agencies
Robert W. Poole Jr.
Lexington Books, 1982
Librarian’s tip: Chap. 1 "Airline Deregulation: The Anatomy of Reform"
Industry Studies
Larry L. Duetsch.
M.E. Sharpe, 1998 (2nd edition)
Librarian’s tip: Chap. 6 "Airline Service: The Evolution of Competition since Deregulation"
Pilots, Personality, and Performance: Human Behavior and Stress in the Skies
Sheila R. Deitz; William E. Thoms.
Quorum Books, 1991
Librarian’s tip: Chap. 6 "Deregulation and Pilot Stress"
Transportation Safety in An Age of Deregulation
Leon N. Moses; Ian Savage.
Oxford University Press, 1989
Librarian’s tip: Chap. 13 "Economic Deregulation's Unintended but Inevitable Impact on Airline Safety"
The Politics of Deregulation
Martha Derthick; Paul J. Quirk.
Brookings Institution, 1985
Librarian’s tip: "Airlines and Trucking" begins on p. 147
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