Deregulation Act of 1978 Essay Example | Topics and Well Written Essays - 1500 words

Deregulation Act of 1978 - Essay Example The Airline Deregulation Act’s intention was to stop government control over airline industry policies. The control was majorly over routes, fares, and market entry of new airlines from commercial aviation. The government approved this Act on 24th October, 1978 and President Jimmy Carter signed it into law four days later (Kaps, 1997). Before the Act, the industry was more of a public utility with a government agency. The CAB; Civil Aeronautics Board determined the routes taken by each airline and the prices they charged their passengers. This has changed ever since after the incorporation of the Act which has seen the market shift to a market –driven industry. The customer demand determined the level of service and price charge. The deregulation Act came by after several flaws in the airline industry. One of them was the Middle Eastern oil case; this led to a rise in price of fuel costs. This shoot up in fuel cost led to price inflation. Another flaw was the development of the wide body aircraft that allowed for carriage of increased capacity to different and many routes with one flight. These two cases came when there was an economic fall that led to a strain on the airlines. This fall led to failure in the airline businesses, and rising fuel prices did not aid the situation at all. The Civil Aeronautics Board in response to this situation and trying to ensure reasonable return for the airlines allowed the different carriers to increase fares. It also embarked on a four year suspension by the carriers on authorizing new services and approved agreements among the airlines to limit the carriage capacity on specific routes. The public did not welcome this move with open arms the fares had increased. The airlines also did not see much change on the Civil Aeronautics Board last decision as through the 1970’s their earnings were poor despite the