AVSC 1030 Lesson 4 - Lesson 4 The Airline Deregulation Act....

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Lesson 4 The Airline Deregulation Act. Prior to deregulation the CAB had promoted the air transportation industry through strict regulation. Through their careful study of the markets the CAB believed passengers living in small and mid- sized communities would not choose air travel if they had to pay the full cost of service. Therefore, the Board set fares lower in short-haul markets and higher in long-haul markets. Congress was concerned that such practices inhibited growth and caused huge inefficiencies in the nation’s air transportation system. The Bill S.2493 was introduced by Howard Cannon of Nevada on February 6, 1978. It was the intention of Congress to minimize the influence and function of the Federal Government in regulating airline economics. The Airline Deregulation Act (ADA) became Public Law 95-504 on October 24, 1978 when then President Jimmy Carter signed the bill. This change forced the industry to relying on competitive market forces to determine the quantity, quality, and price of air travel in the United States. Under the direction of Congress, the Civil Aeronautics Board (CAB), which had regulated the industry for the previous 40 years, was abolished on December 31, 1984. The goals of the Act included a focus on maintenance emphasizing that is was the highest priority of air commerce. The Act relied on competition providing the air transportation service for the country, and encouraged service in major urban areas through satellite airports. Monopolies’ were also meant to be discouraged through the encouragement of startup carriers. The Immediate Impact of the Act Signing this bill meant an opportunity for immediate growth in air transportation, an estimated 40,000 air routes were available for expansion and the CAB was forced to expedite processing of various requests. The Act eliminated the CAB’s authority to set fares and placed the burden of proof on the CAB for labeling a route as inconsistent with “public conveyance”. Moreover, the act allowed airlines to fly routes underutilized by the competition. These guidelines meant expansion for most of the existing carriers. Delta’s Route map five years prior to deregulation Delta’s Route map two years after deregulation In addition to the benefits of route expansion the act relaxed the standards for the establishment of new airlines which brought on a host of new startups. Furthermore, the Act authorized international carriers to offer domestic air service. Together the new startups and the influence of international carriers drastically increased the competition on domestic routes. For the work force, the most important part of this Act was the requirement of airlines to look to furloughed or terminated employees from other carriers for ten years after enactment when hiring. Any employee who had been terminated or furloughed was pleased about this temporary rule. For
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AVSC 1030 Lesson 4 - Lesson 4 The Airline Deregulation Act....

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