The Airline Deregulation Act is a 1978 United States federal law that deregulated the airline industry in the United States, removing U.S. federal government control over such areas as fares, routes, and market entry of new airlines, introducing a free market in the commercial airline industry and leading to a great increase in the number of flights, a decrease in fares, an increase in the number of passengers and miles flown, and a consolidation of carriers. The Civil Aeronautics Board's powers of regulation were phased out, but the Act did not diminish the regulatory powers of the Federal Aviation Administration (FAA) over all aspects of aviation safety.
|Airline Deregulation Act|
|Long title||An Act to amend the Federal Aviation Act of 1958, to , develop, and attain an air transportation system which relies on competitive market forces to determine the quality, variety, and price of air services, and for other purposes.|
|Enacted by||the 95th United States Congress|
|Public law||Pub.L. 95–504|
|Statutes at Large||92 Stat. 1705|
|Titles amended||49 (Transportation)|
|U.S.C. sections created||1371 et seq.|
Since 1938, the federal Civil Aeronautics Board (CAB) had regulated all domestic interstate air transport routes as a public utility, setting fares, routes, and schedules. Airlines that flew only intrastate routes, however, were not regulated by the CAB. Those airlines were regulated by the governments of the states in which they operated. The CAB promoted air travel, for instance by generally attempting to hold fares down in the short-haul market, to be subsidized by higher fares in the long-haul market. The CAB also was obliged to ensure that the airlines had a reasonable rate of return.
The CAB earned a reputation for bureaucratic complacency; airlines were subject to lengthy delays when applying for new routes or fare changes, which were often not approved. For example, World Airways applied to begin a low-fare New York City to Los Angeles route in 1967; the CAB studied the request for over six years only to dismiss it because the record was "stale." Continental Airlines began service between Denver and San Diego after eight years only because a United States Court of Appeals ordered the CAB to approve the application.
This rigid system encountered tremendous pressure in the 1970s. The 1973 oil crisis and stagflation radically changed the economic environment, as well as technological advances such as the jumbo jet. Most of the major airlines, whose profits were virtually guaranteed, favored the rigid system, but passengers forced to pay escalating fares were against it and were joined by communities that subsidized air service at ever-higher rates. United States Congress became concerned that air transport in the long run might follow the nation's railroads into trouble. In 1970 the Penn Central Railroad had collapsed in what was then the largest bankruptcy in history, resulting in a huge taxpayer bailout and the creation of Conrail and Amtrak.
Leading economists had argued for several decades that this sort of regulation led to inefficiency and higher costs. The Carter administration argued that the industry and its customers would benefit from new entrants, the end of price regulation, and reduced control over routes and hub cities
In 1970 and 1971, the Council of Economic Advisers in the Richard Nixon administration, along with the Antitrust Division of the United States Department of Justice and other agencies, proposed legislation to diminish price collusion and entry barriers in rail and truck transportation. While this initiative was in process in the Gerald Ford administration, the United States Senate Judiciary Committee, which had jurisdiction over antitrust law, began hearings on airline deregulation in 1975. Senator Ted Kennedy took the lead in these hearings.
The committee was deemed a more friendly forum than what likely would have been the more appropriate venue, the Aviation Subcommittee of the Commerce Committee. The Gerald Ford administration supported the Judiciary Committee initiative.
In 1977, President Jimmy Carter appointed Alfred E. Kahn, a professor of economics at Cornell University, to be chair of the CAB. A concerted push for the legislation had developed, drawing on leading economists, leading think tanks in Washington, a civil society coalition advocating the reform (patterned on a coalition earlier developed for the truck-and-rail-reform efforts), the head of the regulatory agency, Senate leadership, the Carter administration, and even some in the airline industry. This coalition swiftly gained legislative results in 1978.
Dan McKinnon would be the last chairman of the CAB and would oversee its final closure on January 1, 1985.
The stated goals of the Act included the following:
The Act intended for various restrictions on airline operations to be removed over four years, with complete elimination of restrictions on domestic routes and new services by December 31, 1981, and the end of all domestic fare regulation by January 1, 1983. In practice, changes came rather more rapidly than that.
Among its many terms, the act did the following:
Safety inspections and air traffic control remained in the hands of the FAA, and the act also required the Secretary of Transportation to report to Congress about air safety and any implications that deregulation would have in that matter.
The ADA (along with the Montreal Convention with regard to international flights) also has the effect of preempting state law with regard to claims against airlines for delays, discrimination, consumer protection violations and other allegations of passenger mistreatment.
A 1996 Government Accountability Office report found that the average fare per passenger mile was about nine percent lower in 1994 than in 1979. Between 1976 and 1990 the paid fare had declined approximately thirty percent in inflation-adjusted terms. Passenger loads have risen, partly because airlines can now transfer larger aircraft to longer, busier routes and replace them with smaller ones on shorter, lower-traffic routes.
However, these trends have not been distributed evenly throughout the national air transportation network. Costs have fallen more dramatically on higher-traffic, longer-distance routes than on shorter ones.
Exposure to competition led to heavy losses and conflicts with labor unions for a number of carriers. Between 1978 and mid-2001, eight major carriers (including Eastern, Midway, Braniff, Pan Am, Continental, Northwest Airlines, and TWA) and more than 100 smaller airlines went bankrupt or were liquidated—including most of the dozens of new airlines founded in deregulation's aftermath.
For the most part, smaller markets did not suffer the erosion of service predicted by some opponents of deregulation. However, until the advent of low-cost carriers, point-to-point air transport declined in favor of a more pronounced hub-and-spoke system. A traveler starting from a non-hub airport (a spoke) would fly into the hub, then reach the final destination by flying from the hub to another airport, the spoke. While more efficient for serving smaller markets, this system has enabled some airlines to drive out competition from their "fortress hubs." The growth of low-cost carriers such as Southwest Airlines has brought more point-to-point service back into the United States air transport system, and contributed to the development of a wider range of aircraft types that are better adaptable to markets of varying sizes.
What does the industry's history tell us? Was this effort worthwhile? Certainly it shows that every major reform brings about new, sometimes unforeseen, problems. No one foresaw the industry's spectacular growth, with the number of air passengers increasing from 207.5 million in 1974 to 721.1 million last year. As a result, no one foresaw the extent to which new bottlenecks would develop: a flight-choked Northeast corridor, overcrowded airports, delays, and terrorist risks consequently making air travel increasingly difficult. Nor did anyone foresee the extent to which change might unfairly harm workers in the industry. Still, fares have come down. Airline revenue per passenger mile has declined from an inflation-adjusted 33.3 cents in 1974, to 13 cents in the first half of 2010. In 1974 the cheapest round-trip New York-Los Angeles flight (in inflation-adjusted dollars) that regulators would allow: $1,442. Today one can fly that same route for $268. That is why the number of travelers has gone way up. So we sit in crowded planes, munch potato chips, flare up when the loudspeaker announces yet another flight delay. But how many now will vote to go back to the "good old days" of paying high, regulated prices for better service? Even among business travelers, who wants to pay "full fare for the briefcase?"
Air California, later renamed AirCal, was founded by William E. Myers and Bill Perrera, a partnership of Orange County businessmen. It began as an intrastate airline operating solely within California.
Air California was headquartered in Newport Beach, California. The airline's "home" airport was Orange County Airport, now known as John Wayne Airport.
Scheduled passenger operations commenced on January 16, 1967. Air California's initial route was a nonstop flight between Orange County Airport (SNA) and San Francisco International Airport (SFO), a previously unserved route. Two Lockheed L-188 Electra turboprops were used to make five daily round-trip flights. Following the federal Airline Deregulation Act in 1978, Air California expanded its service to several destinations in neighboring states. In the 1980s, in addition to its California routes, it was flying to Chicago (ORD), Seattle (SEA), Anchorage (ANC), and Vancouver, B.C. (YVR) as well as to other destinations in the western U.S.
The airline was renamed AirCal in 1981, and it was merged into American Airlines in 1987.Air Carrier Access Act
The Air Carrier Access Act of 1986 (ACAA) is Title 49, Section 41705 of the U.S. Code. The Act amended the earlier section 404(b) of the Federal Aviation Act of 1958 (FAA), which was repealed by the Airline Deregulation Act of 1978. The ACAA prohibits commercial airlines from discriminating against passengers with disabilities. The act was passed by the U.S. Congress in direct response to a narrow interpretation of Section 504 of the Rehabilitation Act of 1973 by the U.S. Supreme Court in U.S. Department of Transportation (DOT) v. Paralyzed Veterans of America (PVA). In PVA, the Supreme Court held that private, commercial air carriers are not liable under Section 504 because they are not "direct recipients" of federal funding to airports.The Act was construed to contain an implied private right of action. However, in 2001, the U.S. Supreme Court decided Alexander v. Sandoval, which held that federal courts may not find an implied private right unless a statute gives explicit indication that Congress intended to bestow such a right. In 2004, the U.S. Court of Appeals for the Tenth Circuit followed the lead of the US Court of Appeals for the Eleventh Circuit, which relied on the Sandoval decision to hold that the Act can only be enforced by filing an administrative complaint with the DOT.In 2013, the DOT provided new rules requiring all domestic and foreign air carriers to have accessible websites and kiosks. By December 12, 2015 the core functionality of all Air Carrier's websites needed to be accessible, by December 12, 2016 the remaining web pages are required to be accessible.Since this act prohibits airlines from discriminating against passengers with disabilities, they must allow them to bring along their service animals. In recent years, people have been taking advantage of this act. Delta Air Lines released the statistic that they've seen an 84% increase in animal incidents. Not all of the disability animals that have came through the doors of Delta Air Lines however, have actually been service animals.Air Niagara
Air Niagara was an airline based in the New York side of the Niagara Falls. It was one of the many airlines that started flying after the Airline Deregulation Act of 1978 in the United States.
Air Niagara offered jet flights from Niagara Falls International Airport (IAG), hoping that tourism to their home region would propel the airline to profitability.
The only airline to provide jet flights to that airport from 1980 to 1984, Air Niagara operated two Boeing 727-100s to serve their only route, from Niagara Falls to Newark Airport (EWR) in New Jersey. The airline's 727s had been delivered new to Eastern in 1964 (both airplanes ended up being broken up in Mexico in 1994).
Air Niagara ceased operating in 1984.
Another airline also used the Air Niagara name. This air carrier was based in Canada and operated Convair 580 turboprops and Fokker F28 Fellowship jets.Air South (Georgia)
Air South was an airline from the United States. Founded as Nationwide Airlines Southeast in 1969, the company had its headquarters in St. Simons, Georgia. Out of its base at Atlanta Municipal Airport, Air South operated regional scheduled passenger flights within the southeastern USA, using a small fleet of Fairchild F-27 and Martin 4-0-4 aircraft, as well as the Beechcraft Model 99.In 1975, Air South was acquired by Florida Airlines and became a wholly owned subsidiary, along with Shawnee Airlines. Over the following years, Air South continued flight operations under its own branding. As a consequence of the Airline Deregulation Act, it was eventually shut down in 1978.Airline deregulation
Airline deregulation is the process of removing government-imposed entry and price restrictions on airlines affecting, in particular, the carriers permitted to serve specific routes. In the United States, the term usually applies to the Airline Deregulation Act of 1978. A new form of regulation has been developed to some extent to deal with problems such as the allocation of the limited number of slots available at airports.Capitol Air
Capitol Air was a charter airline in the United States which was operational from 1946 to its bankruptcy filing on November 23, 1984. It was founded as Capitol Airways in 1946, and then renamed Capitol International Airways in 1967. In 1980, the airline changed its name to Capitol Air. During the late 1970s and early 1980s it operated international and domestic scheduled passenger service in addition to charter flights. It was founded by former Army Air Corps pilots, Jesse Stallings, Richmond McGinnis, and Francis Roach, following the end of World War II. Executive Vice President was Frank J. Sparacino. European Director of Operations was Chuck Carr, the Director France Michel Lelièvre and the LBG Airport Manager, P. Landelle. Gatwick Ops was the European Office. In the late 1970s, Capitol Air became a scheduled air carrier following the passage of the Airline Deregulation Act of 1978. The airline was incorporated in Delaware but headquartered in Smyrna, Tennessee.
Capitol Air maintained a large presence in the eastern United States and Europe. Its hubs were John F. Kennedy International Airport Hangar 11 in New York City, Brussels, Belgium and San Juan, Puerto Rico. From New York/JFK Capitol Air served Los Angeles (LAX), Chicago O'Hare (ORD), Brussels (BRU), Frankfurt (FRA), Paris, France (LBG) Aguadilla (BQN), San Juan (SJU) and Puerto Plata (POP). From San Juan its served Miami, Chicago, Philadelphia, Boston and Santo Domingo. Even though Capitol commenced scheduled passenger operations, charters were still a big part of its operations. Many of the charters operated into San Juan, Puerto Rico, were for Canadian tour operators that required passenger air service in conjunction with cruises that departed San Juan every Saturday.
Capitol Air also operated many charter flights for the United States military. One major trunk route in the mid-1970s connected Rhein-Main Air Base (Frankfurt), Germany to Charleston Air Force Base, South Carolina with a refueling stop at Bradley Air National Guard Base (co-located with Bradley International Airport) in Windsor Locks, Connecticut.
Capitol Air declared bankruptcy in the mid-1980s after George Batchelor, now Capitol's owner, had largely dismantled the airline in favor of his newly acquired venture, Arrow Air, another formerly all-charter air carrier that eventually initiated scheduled passenger airline operations.Golden Pacific Airlines
Golden Pacific Airlines (YB), IATA 486 (1981-1989) was a United States Regional Airline that was unrelated to the Golden Pacific Airlines of the 1970s. Golden Pacific Airlines (YB) was founded in 1981 in Kingman, Arizona and operated a fleet of 10 seat Cessna 402 aircraft under Part 135 of Federal Air Regulations. Designated an Essential Air Service provider under provisions of the 1979 Airline Deregulation Act the carrier was selected by the US Civil Aeronautics Board, in 1981, to replace Sky West Airlines in providing Air Service to Kingman and Prescott, AZ over a linear Phoenix-Prescott-Kingman-Las Vegas route. Points served subsequently expanded to include Phoenix to Sierra Vista/Fort Huachuca, Sedona and Winslow, AZ. Sold in 1987, the airline ceased operations in 1989 after it was unable to obtain 19-passenger Fairchild Metroliners to continue service.Greyhound Bus Lines strike of 1983 (Seattle)
The Greyhound Bus Lines Strike of 1983 in Seattle was part of a nationwide seven-week-long strike of the members of the Amalgamated Transit Union working for Greyhound Bus Lines. In Seattle, 175 drivers and terminal workers who were represented by ATU locals 1384 and 1055 walked off the job at 11pm on November 2, 1983. In total, more than 70 daily incoming and outgoing trips were cancelled in Seattle.History of non-scheduled airlines in the United States
The history of non-scheduled airlines in the United States records the rise and fall of a uniquely unencumbered sector of the heavily regulated American airline industry from the end of World War II to the Airline Deregulation Act of 1978. Frequently operating in the shadow of colossal national airlines, which received federal subsidies and flew scheduled passenger service at costly rates, non-scheduled airlines were generally small companies which could be chartered to transport goods or passengers at an hourly or distance-based charge. Non-scheduled airlines were the first to introduce 'aircoach' fares for civilian air travel in the late 1940s, and brought about the low-rate service offered by almost all airlines operating today.
Non-scheduled airlines first appeared in significant numbers in the United States after the Second World War, as returning pilots purchased discount surplus planes from the government and set up their own uncertificated air services under the non-scheduled charter service exemption in the 1938 Civil Aviation Act. Low overhead and fewer regulations allowed the non-scheduled airlines to offer considerably lower fares than the national scheduled carriers, inaugurating the immensely popular aircoach service which attracted millions of Americans unable to afford tickets on the regular airlines. Though the regulatory actions of the Civil Aeronautics Board ultimately extinguished the burgeoning non-scheduled industry, the idea of cheap, efficient air transport endured and by the passage of the 1978 Airline Deregulation Act nearly all civil airlines had transitioned to an aircoach model.Intrastate airline
Intrastate airlines in the U.S. are defined as air carriers operating inside of one individual state and thus not flying across state lines. Larger intrastate airlines in the U.S. that operated mainline turboprop and/or jet aircraft were created as a result of past federal airline regulations as passenger air carriers that only flew intrastate service were not regulated by the federal government but were instead primarily regulated by the respective state governments in their home states. For example, Pacific Southwest Airlines (PSA) and Air California were both regulated by the California Public Utilities Commission (CPUC) prior to the federal Airline Deregulation Act of 1978. Intrastate air carriers primarily operated in the United States but also elsewhere globally. In the U.S., California, Florida, Hawaii and Texas had scheduled jet passenger service operated by intrastate air carriers in the past.Legacy carrier
A legacy carrier, in the United States, is an airline that had established interstate routes before the beginning of the route liberalization which was permitted by the Airline Deregulation Act of 1978, and was thus directly affected by that act. It is distinct from a low-cost carrier, which in the United States are generally new airlines that were started to compete in the newly deregulated industry.Midway Airlines (1976–1991)
Midway Airlines was a United States airline founded on August 6, 1976, by investor Kenneth T. Carlson and joined by Irving T. Tague and William B. Owens in October 13, 1976, filing with the Civil Aeronautics Board (CA) for an airline operating certificate. Although it received its operating certificate from the CAB prior to the passage of the Airline Deregulation Act in 1978, it is widely recognized as the first post-deregulation start-up. The airline commenced operations on October 31, 1979.The airline was intended to breathe new life into Midway International Airport, then called Chicago Midway Airport, which had lost most of its scheduled flights to O'Hare International Airport. Midway Airlines and the revitalized airport were advertised as a trouble-free alternative to O'Hare, and both of these spurred re-development and growth on Chicago's South Side. The airport was billed as a convenient ten- to fifteen-minute drive from downtown Chicago.Pacific Southwest Airlines
Pacific Southwest Airlines (PSA) was a United States airline headquartered in San Diego, California, that operated from 1949 to 1988. It was the first large discount airline in the United States. PSA called itself "The World's Friendliest Airline" and painted a smile on the nose of its airplanes, the PSA Grinningbirds. Opinion L.A. of the Los Angeles Times called PSA "practically the unofficial flag carrier airline of California for almost 40 years."The airline initially operated as an intrastate airline wholly within the state of California. This strategy which avoided the steep costs from federal regulation would later serve as the model for Southwest Airlines, doing in Texas what PSA had done in California. Following the Airline Deregulation Act of 1978, PSA expanded to other destinations in other western states in the U.S., and also eventually operated international service to several destinations in Mexico.
In 1986, PSA became the first of two airlines that were bought, or merged, into the existing USAir, followed by Piedmont Airlines in 1987. The PSA acquisition was completed in 1988. USAir changed its name to US Airways in 1997. In 2005, after its second bankruptcy filing, America West Airlines acquired US Airways, continuing with the name until it merged with American Airlines in 2013.
In November 1995, the PSA name was given to Jetstream International Airlines, becoming PSA Airlines, so that US Airways could preserve the PSA name and trademarks. US Airways had acquired Jetstream International in 1987, when it was a subsidiary of Piedmont Airlines.Passenger airline
A passenger airline is an airline dedicated to the transport of passengers.
There are several types of passenger airlines, mainly
Mainline airlines operate flights by the airline's main operating unit, rather than by regional affiliates or subsidiaries
Regional airlines, non-"mainline" airlines that operate regional aircraft; regionals typically operate over shorter non-intercontinental distances, often as feeder services for legacy mainline networks
Low-cost carriers, giving a "basic", "no-frills" and perceived inexpensive service
Business class airline, an airline aimed at the business traveler, featuring all business class seating and amenities
Charter airlines, operating outside regular schedule intervals
Flag carriers, the historically nationally owned airlines that were considered representative of the country overseas.
Legacy carriers, US carriers that predate the Airline Deregulation Act of 1978
Major airlines of the United States, airlines with at least $1 billion in revenuesRailroad Revitalization and Regulatory Reform Act
The Railroad Revitalization and Regulatory Reform Act of 1976, Pub.L. 94–210, S. 2718, 90 Stat. 31, enacted February 5, 1976, often called the "4R Act," is a United States federal law that established the basic outlines of regulatory reform in the railroad industry and provided transitional operating funds following the 1970 bankruptcy of Penn Central Transportation Company. The law approved the "Final System Plan" for the newly created Conrail and authorized acquisition of Northeast Corridor tracks and facilities by Amtrak.
The Act was the first in a series of laws which collectively are described as the deregulation of transportation in the United States. It was followed by the Airline Deregulation Act (1978), Staggers Rail Act (1980), and the Motor Carrier Act of 1980.Texas Air Corporation
Texas Air was an airline holding company incorporated in 1980 in the United States created to hold and invest in airlines, starting with Texas International Airlines as its core. The company had its headquarters in the America Tower in the American General Center in Neartown Houston, Texas.After passage of the Airline Deregulation Act in 1978, Texas International Airlines expanded significantly, reduced its costs by discontinuing unprofitable routes and replaced its outdated Convair turboprops with newer DC-9 aircraft. In 1982 Texas Air took over then debt-laden Continental Airlines, retaining Continental's better-known and less regional name. Continental Airlines, in moribund financial condition, succeeded in negotiating concession packages with all of its unions except for the International Association of Machinists (IAM). Because of the refusal of the IAM to renegotiate its contract, the company ultimately filed for Chapter 11 bankruptcy, which allowed Frank Lorenzo (President and chief executive officer), to reject the collective bargaining agreements with its various unions. Some believe that Lorenzo wanted the strike to justify the bankruptcy filing, so that he could get rid of the unions. Continental Airlines would again file bankruptcy in 1991, one month after Lorenzo left his position as CEO.
In 1985, the company lost a bid to take over Trans World Airlines to corporate raider Carl Icahn. In 1986 the company acquired Eastern Air Lines and People Express, with its Frontier Airlines included. By 1987 Texas Air Corporation had control of 20 percent of the U.S. airline market, even though the holding company only had 20 official employees.By the early 1990s the company had been split up, with parts sold to Scandinavian Airlines System, Ross Perot's EDS (Electronic Data Systems), and an Air Canada-led investment group. Most of the former Texas Air became known as Continental Airlines, and eventually merged into United Continental Holdings.Trans International Airlines
Trans International Airlines (TIA) was an airline that offered charter service from and within the United States. It also operated scheduled passenger service flying as Transamerica Airlines as well as charter flights during its last decade. Its headquarters were on the grounds of Oakland International Airport (OAK) in Oakland, California.