Aviation Deregulation Essay

Aviation Deregulation

Man’s desire to reach the skies found expressions in many ways.  Air flight had already taken place long before planes were invented through hot air balloons, which were powered by steam engines.  It was only in 1903 that the Wright Brothers, Wilbur and Orville, invented the first airplane that could fly at a sustained power and time.

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Since that period, manufacturers have continued to look for ways to improve performance and power.  Over the years, as planes evolved to become bigger, faster, lighter, and could travel longer distances, they turned into mediums of transportation that could carry mail, cargo, and human passengers.  The first plane to carry a passenger was created by the Wright Brothers in 1918.

Aviation’s Golden Age

When war broke out in 1914, airplanes became useful to military operations.  After the war, the machines’ usefulness turned into other areas.  Fighter pilots used their skills to gain a means for living, and the planes were used in commerce.  They began carrying passengers for air rides or transporting them for a fee.  Outside the United States, Germany-based Graf Zeppelin successfully launched the first commercial flight across the Atlantic using its airship.  But less than a decade later, the use of dirigibles declined, and eventually died, due to accidents that killed passengers.

In the United States, several wealthy individuals acquired planes for private and business use.  Some use them to make aerial surveying and crop treatment.  Others use them to transport

corporate executives.  With the development of the Cessna planes in the 1920s, small aircraft became available to the public at comparatively lower prices.  As a result, the general aviation industry was borne during this time.  Self-taught pilots carried passengers from one location to another for a fee, or they carried cargo and performed tasks that required the use of planes.

On the national level, the U.S - Aviation Deregulation Essay introduction. Congress had finally overcome its earlier reluctance to embrace the development of planes.  Giving in to the promptings of the postal agency, it appropriated one hundred thousand dollars in 1918 to set-up an experimental mail service using airplanes.  The first airmail route was made between Washington and New York.  Planes carrying mails flew about two hundred eighteen miles daily except on Sundays.  This experimental route was able to overcome difficulties like unfavorable weather conditions.  Because of this, the postal service thought of adding the New York to San Francisco route, which is a transcontinental crossing.  Many more routes were added and the planes also began flying at night.  During this time, passenger transport has already begun but it was sporadic.

The Air Mail Act of 1925 was drafted to encourage commercial flying of mails in the country.  The Act allowed the U.S. Postal Service to enter into contracts with airline companies for them to provide feeder routes to the general transcontinental route.  In 1927, the transport of mail was fully transferred to commercial airlines.

Douglas DC-3

Commercial airline service had its beginnings in the 1920s and 1930s.  With the manufacturing of the Douglas DC-3, airline companies at that time were able to realize profit in transporting passengers.  This aircraft has a fixed wing and is propeller-driven.  Although transcontinental air travel took fifteen hours to complete, the DC-3 has a built-in kitchen and sleeping berths, making the travel more comfortable for passengers.

As more and more people started flying commercially, airports sprang in cities and towns.

The Second World War brought various innovations to the aviation industry.  It was during this time that the jet aircraft and the liquid-fueled rockets were made.  After the war, thousands of qualified pilots left the military, while cheap war surplus planes became available for transport and training purposes.  The ending of war created a new middle class.  The emergence of this group prompted plane manufacturers like Cessna and Beechcraft to expand output to meet rising demand.  General aviation experienced a boom at this point.

United Airlines claims to be the oldest airline to fly commercially in the country.  It traces its beginnings to the Varney Air mail services, which later grew into Boeing Air Transport.  Boeing Air was an airline company and a manufacturing firm.  It also owned airports.  After the Air Mail Scandal in 1930, Boeing Air Transport was forced to divide the company into three operating units, one of which is United Airlines.

Regulation

The government had no control over aviation at the start of the twentieth century.  Because of the absence of regulatory laws over aviation, there were many flying accidents and fatalities, which prompted the government to create legislations governing control and safety in air transportation.  The Air Commerce Act was signed into law on May 20, 1926, which provided that pilots should secure training and licenses before they could fly planes, while aircraft should be given certificates attesting to their capacity to fly safely.

The first commercial aviation regulator was William P. MacCraken, Jr., who was appointed in 1926 as the Assistant Secretary of Commerce for Aeronautics by President Herber Hoover.  MacCraken helped to formulate the safety standards and regulations that were included in the 1930 Air Mail Act.

The Air Mail Act of 1930 allowed the postmaster general to enter into contracts with companies based on space or volume instead of mail weight.  The law gave Walter Folger Brown, the Postmaster General in the 1930s, overall authority in the air transportation industry.  One of the goals of the 1930 Act was to encourage the carrying of passengers among smaller airlines.

Among Brown’s authority under the Act was to consolidate routes as he saw fit.  Seeing that consolidating routes was the only way to lessen the problems experienced by the aviation sector at that time, Brown entered into an agreement with three airlines in what is popularly known as the Spoils Conference.  Brown divided the routes among United Airlines, Trans World Airlines and American Airlines, effectively eliminating the smaller competitors.  By cutting them from mail transport, the smaller airlines were expected to diversify and focus on passenger transport.  This decision turned into a scandal a few years later.

After-Effects of the Spoils Conference

The Spoils Conference refers to a meeting wherein Postmaster General Brown met with selected airline executives and agreed to divide among them the airmail routes.   The commercial transport of mail was very expensive for financially struggling airline companies that were flying old planes.  Brown worked out a plan that would consolidate the routes in a network operated by airline companies that were stable and technologically well-equipped.  The move was sound and solved profitability problems.  But this gave rise to issues of favoritism.  There were disgruntled parties who questioned the ethical and legal aspects of the agreement.  The issue became a

national point of interest that the Senate was prompted to order an inquiry.  The scandal was painful for the administrations of then president, Herber Hoover, but it became the catalyst for the airline industry’s growth.

In 1933, the congressional inquiry was made.  President Franklin Roosevelt had already succeeded Hoover as head of the country.  In response to the scandal and while investigation was ongoing, Roosevelt cancelled all contracts with the commercial airlines and asked the U.S. Army’s air brigade to facilitate the transport of mails in the country.  The Air Force responded positively that they were ready to perform the task.  It, however, failed to tell congress that most of its pilots were reserve officers who had very limited flying hours.  The operation was a failure and some called it a legalized murder because it resulted to twelve fatalities among pilots.  This publicly embarrassed the president and threw the public into a furor.  Roosevelt had no option but to return to commercial airlines the transporting of mails in the country.  Despite relinquishing transport to commercial airlines, a new law was passed to better regulate the airmail system

The Air Mail Act of 1934 was drafted to closely regulate the airmail industry and promote competition.  Measures were made to ensure that the airlines that signed the contracts with Brown wouldn’t profit from the agreement.  The purpose of this was to make the playing field more equal for all the players.  More importantly, the government wanted the commercial air transport of passengers to prosper.  Airline companies began to focus on expanding passenger transport and the improvement of aircraft safety measures.

Other than the passing of the Act, it was also in 1934 that the aeronautics agency’s name was changed to the Bureau of Air Commerce.

The Civil Aeronautics Act of 1938 transferred control of civil aviation to the newly created Civil Aeronautics Authority.  This new agency had the authority to regulate airfares and air routes.  Two years later, the agency was split into the Civil Aeronautics Administration and the Civil Aeronautics Board.  The former was tasked with air traffic control and safety, and the development of airways.  The CAB was in charge with legislations and investigation of accidents, and regulation of fares and routes.

Aviation After World War II

Commercial air transportation in the United States experienced a boom after World War II as more trained pilots left military service.  The CAA responded by using radar to control the increase in air traffic.  The agency also undertook implementation of a program for the development and improvement of civil airports.

Competition between commercial airline companies and charter companies was stiff.  Flying commercially was expensive and routes were limited.  Charter companies, on the other hand, provide flexibility in their routes.  Due to its prohibitive pricing, flying was limited to those who can afford luxurious travel.

 The CAB, as the governing body for fares and routes, was also created to ensure that airline companies would see reasonable profit in their operations.  To this end, any adjustments and promotional activities targeted at increasing passenger load had to obtain board approval.  However, the regulatory body had more often than not took years to decide on proposals submitted to them.  The CAB, in essence, was hindering growth and profitability in the sector by its highly bureaucratic systems and procedures.

Over the years, the government received tremendous pressures from various sectors to improve the CAB’s efficiency.  Coupled with the energy crisis of the 1970s, the government was forced to begin studying in earnest airline deregulation.  In 1975, Senator Ted Kennedy led the formal study and hearings on airline deregulation.  Releasing control of the sector took years to complete.  Finally, on October 24, 1978, the Airline Deregulation Act was passed into law.

Deregulation and Its Effects

The deregulation of aviation effectively removed government control over commercial air transport and encouraged development and competition.  The CAB’s power to regulate fares was eliminated, giving airlines flexibility in their marketing programs.  Ultimately, the CAB lost its power in any aspect of the industry.  In essence, deregulation freed the commercial air transport industry from bureaucracy and allowed international competition in the domestic arena.  It also allowed domestic airlines to operate international routes.

Soon after deregulation, many airlines abandoned unprofitable routes and adopted the hub-and-spoke system to promote efficiency.  Also, airline companies have gained flexibility in their routes, and because of this more cities were provided with access to air transport.  Since international airlines were allowed to enter the country, it came to a point in the 1980s that a price war ensued among the air transport companies, particularly in routes where demand is low.

Among the more notable effects of deregulation was the collapse of PanAm, the U.S.’s

most important international airline.  Before deregulation, only PanAm can fly outside of the United States.  It had control of international traffic in America.  After it lost that privilege in 1978, PanAm found itself having to compete with many airlines on its international routes.   It was also forced to acquire a domestic airline in order to enter the market.  But it was no measure for some of the upstarts in the market.  In the end, PanAm declared bankruptcy and sold profitable assets to other airlines.

On the marketing side, deregulation resulted to an increase in the number of passenger load as fares decrease, and the formulation of the frequent flyer programs that encourages loyalty among the flying public.  Marketing and promotional activities became intense and more creative.  Butler (2008) said in a report that the George Mason University and the Brookings Institution believe that the flying public has saved about $19.4 billion annually from decreased fares in air travel.

After twenty years of air transport deregulation, there have been recommendations that the government should take a role in the operation of the aviation industry.  However, the complaints are not enough to overshadow the positive effects of deregulation.  One of the problems that arose as a result of democratizing air transport is congestion in airports.  This became a problem because infrastructures in the airline industry are still controlled by the government while the airlines are running independently. There is an expected increase in passenger traffic, requiring a major upgrade of control and safety systems.  According to the National Civil Aviation Review Commission, upgrading of infrastructure should keep up with how airlines expand operations.  Airports and air traffic control should also be funded and managed like a commercial enterprise in order to keep up with the changes in the industry.

References

A Brief History of the Air Mail Service of the U. S. Post Office Department.  Retrieved April 8,

2008, from http://www.airmailpioneers.org/history/Sagahistory.htm

Airline Deregulation Act of 1978.  Retrieved April 8, 2008, from

http://ostpxweb.dot.gov/aviation/airlinederegact.htm

Aviation Resource Center. (1997). Retrieved April 7, 2008, from

http://www.geocities.com/capecanaveral/4294/history/

Bednarek, J. “General Aviation – An Overview.” U.S. Centennial of Flight Commission.

Retrieved April 7, 2008, from http://www.centennialofflight.gov/essay/GENERAL_AVIATION/GA_OV.htm

Khan, A.E. “Airline Deregulation.” The Concise Encyclopedia of Economics. Retrieved April 8,

2008, from http://www.econlib.org/LIBRARY/Enc/AirlineDeregulation.html

Poole, R.W., and Butler, V. (2008). “Airline Deregulation: The Unifinished Business.”

Regulation, Vol. 22, No. 1.

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