In October 1978, the Airline Deregulation Act was signed to help remove regulation from the government. Once signed, the Civil Aeronautics Board’s (CAB) regulations no longer existed and the organization ended up closing in 1985. The key thing to note, is that a year following the enactment of the bill. New domestic cargo carriers were able to operate as long as they were seen as “fit, willing and able”. This is a change to the previous conditions, which were “required” by the public convenience and necessity (PC&N).
This meant that there was more opportunity for new airlines. More opportunity for new airlines also meant, more competition. Major airlines or legacy carriers that benefited from the Civil Aeronautics Board’s regulations, were not used to competition. Previously the CAB would rarely accept new airlines or flights to be added. So this was a definite change to the industry once implemented.
As a number of new airlines started to emerge. Many were also starting to go bankrupt. With a number of new airlines entering the market at such competitive prices. You began to notice more airlines try to compete, merge or start to go out of business. Not only that. A number of start up airlines had business plans that were out of their budget. This left them unable to utilize their supply of aircraft, without adequate demand.
As regulations seized and more airlines started entering into the market. Legacy carriers were not as open to the new competition. As a result, they would employ strategies that would limit their ability to be efficient and grow. For instance, legacy carriers would attempt to drive low cost carrier’s (LCC’s) out of their hubs by cutting costs and employing other methods.
In addition, due to the abundance of new airline approvals. It ended up putting a strain on the FAA. Incidents such as Flight 592 & Flight 261 were quite detrimental to operations and prompted the inclusion of an FAA 90 Day Safety Review, that focussed mostly on startups.
In conclusion, the airline deregulation act was a great way to remove restrictions, open up the market and allow for more growth within the airline industry. To many, especially low cost carriers. It was an excellent opportunity for entering into the market to test their ideas and the ongoing competition. However for others, the competition was mostly just a distraction and only interfered with their ability to maintain dominance along with high ticket and travel fares.
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