Government accountability...
Airline Deregulation Act
From Wikipedia, the free encyclopedia
President Jimmy Carter signs the Airline Deregulation Act.
The
Airline Deregulation Act (or
ADA) is a
United States federal law signed into law on
October 24,
1978. The main purpose of the act was to remove government control from
commercial aviation and expose the passenger
airline industry to market forces.
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[edit] History of airline regulation and the CAB
Since 1937, the federal
Civil Aeronautics Board (CAB) had regulated all domestic
air transport as a
public utility, setting fares, routes, and schedules. 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.
It also earned a reputation for bureaucratic complacency; airlines were subject to lengthy delays when applying for new routes or fare changes, which were not often approved.
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 energy crisis and
stagflation radically changed the economic environment, as did 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 did not, nor communities which subsidized air service at ever-dearer rates.
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 in 1976.
Leading economists had argued for several decades that this sort of regulation led to inefficiency and higher costs. In 1970-71 the
Council of Economic Advisors in the
Richard Nixon Administration, along with the Antitrust Division of the Department of Justice and other agencies, proposed legislation which would diminish
price collusion and entry barriers in rail and
truck transportation. While this initiative was in process, in the follow-on
Gerald Ford Administration, the
United States Senate Judiciary Committee, which had jurisdiction over the antitrust laws, a part of
competition law, began 1975 hearings on airline
deregulation. Senator
Ted Kennedy took the lead in these hearings. This 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 Senate 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.
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