[1] Although it is generally recognized that the purpose behind government regulation is to create a stable industry,[2][3] in the decades leading up to deregulation many airline market analysts expressed concerns with the structure of the United States' passenger air transport system.
It was, and still is, a part of a sweeping experiment to ultimately reduce ticket prices and entry controls holding sway over new airline hopefuls.
A similar but less laissez-faire approach has been taken by the European Union, Australia, United Kingdom, Scandinavia, Ireland and select South and Central American nations.
[4] In the early days of interstate air travel, the prevalent thought at the time was that government regulation was necessary to protect and promote the fledgling industry.
[5] Congress created the Civil Aeronautics Authority, which became the Civil Aeronautics Board (CAB), and gave the CAB the power to regulate airline routes, control entry to and exit from the market, and mandate service rates, to investigate accidents, certify aircraft and pilots, to create rules for air traffic control (ATC) and to recommend new rules to prevent repetition of previous accidents.
In 1938 the U.S. government, through the Civil Aeronautics Board (CAB), regulated many areas of commercial aviation such as routes, fares and schedules.
The CAB had three main functions: to award routes to airlines, to limit the entry of air carriers into new markets, and to regulate fares for passengers.
[7] Much of the established practices of commercial passenger travel within the U.S., went back even farther, to the policies of Walter Folger Brown, the U.S. postmaster general from 1929 to 1933 in the administration of President Herbert Hoover.
[8] His influence was crucial in awarding contracts so as to create four major domestic airlines: United, American, Eastern, and Transcontinental and Western Air (TWA).
[citation needed] Similarly, Brown had also helped give Pan American a monopoly on international routes.
(See also the U.S. Centennial of Flight Commission [11]) Typical regulatory thinking from the 1940s onward is evident in a Civil Aeronautics Board report.
Because hubs allowed passenger travel to be consolidated in "transfer stations", capacity utilization increased, decreasing costs and lowering ticket prices.
[20] According to the 2008 American Customer Satisfaction Index, a University of Michigan study of 80,000 consumers' expectations and preferences, the major US airlines ranked last among all the industries surveyed.
[27] However, he also argued that such congestion and delays was also a sign of deregulation success (because they were caused by lower prices leading Americans to book more flights).
[15] Subsequently, between 2000 and 2008, 100,000 jobs were shed - approximately 20% - and formerly busy hub airports (such as Pittsburgh and St. Louis) reduced staffing due to a significantly decreased number of flights.
Then-retired former CEO of American Airlines Robert Crandall stated, "I'm not sure 9/11 by itself had any particular profound impact [on the industry], but it exacerbated the problems they had before 9/11.
"[29] Although regular pay-cuts had become commonplace in the years following deregulation, of the employees remaining after September 11, 2001, the average pay cut has been 18%,[2] with many of the highest earners seeing as much as 40% reductions.
Open Skies agreements have been successful at removing many of the government-implemented barriers to competition and allowing airlines to have foreign partners,[citation needed] access to international routes to and from their home countries, and freedom from many traditional forms of economic regulation.
During the same time period, Southwest Airlines continued to expand its route structure, buy new airplanes, and hire more employees, while remaining profitable.
Our airlines, once world leaders, are now laggards in every category, including fleet age, service quality and international reputation.