In a simple sentence, airline deregulation can be described as the minimization of government interference in the affairs and operations of airline companies. A little economics will be introduced in this article to let the user understand the concepts of airline deregulation but not to worry, the subject will only cover the basics of Economics 101. Remember? That compulsory module you were made to take from Junior to Senior High school.

According to that course, from time immemorial, consumers are the major movers of any market economy therefore producers try to make it a point of duty to adequately satisfy their consumers while they make their profits by the side. This concept is the same in the airline industry. The deregulation of the airline industry wasn’t much in focus especially in the early to mid twentieth century when aviation began to develop. During this period, air transportation was far from the reach of ordinary people because of the high cost of airfares. Even the middle class only flew for very important reasons for flying was the exclusive preserve of the wealthy.

In contrast, the results of airline deregulation has affected everyone because nowadays, anybody belonging to any class of society can fly to anywhere; if not internationally, then to domestic destinations. To explain airline deregulation further, we would use the world’s freest economy – the United States of America.

In the mid twentieth century, all aspects of domestic air travel in the United States was totally under the control of the U.S. Government, through the Civil Aeronautics Board (C.A.B.). This government agency monitored and regulated all aspects of air transport in the country. From choosing the type of airplane flying the United States air space, to designating which airlines will fly what routes, selecting airlines’ personnel and assigning of job schedules, down to drawing up the airfares allowed for flights. Then, flights were determined based on the length and distances of the journeys. Everything that was air transport had government involvement in it. Thus, C.A.B. was mired in bureaucratic inefficiency and short-sighted decision making.
After a couple of decades, air transport economics gradually crept into the management and affairs of air travel and its decision-making processes. So in the late seventies, the United States President, Jimmy Carter appointed a renowned Economist, Alfred Kahn, a Professor of Economics in Cornell University, to head the C.A.B. Knowing the retrogression that government policies had brought to the air transport sector, Kahn insisted on deregulating the aviation sector of the United States, meaning the airline industry must be loosened from the shackles of government control and its policies. He went on to apply the positive benefits of Economics to the industry.

With this development, October 28th, 1978 marked the turning point of the airline industry in the U.S. when the President took the decision to sign the Airline Deregulation Act (A.D.A.) into law. Afterwards, the A.D.A. paved the way for U.S. Airlines to operate commercially with the laws of Economics like forces of demand and supply and the profit motive.

Commercial airlines moved into the industry riding on the coach of the Airline Deregulation Act. Profits became driven by free market forces, healthy rivalry and competition.

How did Airline Deregulation affect passengers and brought cheap airfares?

The Airline Deregulation Act brought about changes in the airline industry. Among them, airlines could have their own policies, add new or remove existing routes from their companies’ flight schedules depending on where their profit was more. Airlines could also designate the desired number of flights or aircrafts on a route as part of cost-benefit measures; meet and take managerial decisions for their companies. They could set and offer discounts on their air tickets; offer their customers cheap airfares or free seats on their flights. In short, government interference was minimal or non-existent.

Airline deregulation became the toast of many new airlines looking to compete with established ones. So with the deregulation came an influx of airlines. In the post-deregulation era, there were airline mergers and acquisitions with many airlines prospering while some were going bankrupt. The bankruptcy however appeared to be increasing due to the effect of deregulation so the U.S. Government took decisive steps to prevent further losses with a loan of $10 billion to some airlines. This simple move by the Government reversed their uncertain fate to fortunes, while passengers also felt the impact of the airlines’ prosperity through cheap airfares and air ticket discounts. Airlines thus continued to prosper until September 11th, 2001.