Airline Deregulation and Economics

In my Aviation 300 class we discussed in detail the Airline Deregulation Act of 1978. Some of the things that we have discussed here in Economics give that Act more meaning to me.

With airline deregulation, the Civil Aeronautics Board no longer exists and no longer controls the entry, exit, and fares, among other things of airlines. Therefore, the industry is better able to naturally reach its equilibrium point of supply and demand because, as we discussed, it is better to leave a market alone and let the natural forces of supply and demand work upon it so that it reaches its equilibrium point on its own. The vanishing of the Civil Aeronautics Board and the partial airline deregulation allowed just that to happen.

Also, airlines nowadays compete with each other based mainly on their fares which actually produce lower travel fares for consumers. To most, however, it may not seem like air travel is cheap but when considering how the market would be if its fares and routes were still regulated and chosen for them, it is. Of course with lower fares comes less amenities because airlines’ amenities are not what distinguishes them from the next airline anymore as was the case when they were still regulated by the Civil Aeronautics Board. The increase of fees by airlines and the near elimination of many amenities deal not only with airlines lowering prices but also with major events affecting the aviation industry, the economy, and many airlines approaching or declaring bankruptcy.

The elimination of barriers to entry by the Civil Aeronautics Board has allowed for many new airlines to pop up over the years, some successful and some not. For the most part, those airlines have been low cost carriers that have literally given the legacy airlines a run for their money and given more individuals the chance to fly who potentially had less discretionary income to spend on air travel and varying opportunity costs.

Deregulation also allows for mergers of airlines like Delta and Northwest for example. Together they become the world’s largest airline and I think it will be very interesting to see how the new Delta does in the coming years. I am assuming that financially the airline will continue to improve and become more profitable since they will now service so many more passengers and destinations. Hopefully this will make way for the elimination of some newly constructed fees for things like checking bags. Had airlines still been regulated this merger may not have happened even though it has been proven that these two airlines combined, although large, are not a monopoly to the airline industry.

Kayla Thomas

Econ 200

T R 8:00