Another Stage for Airline Industry in the U.S.

Abstract

Airline Deregulation Act was signed in 1978, and issues regarding the deregulation have been discussed for almost five decades. In most recent years, bankruptcy rate in airline industry has increased, the impacts from the Deregulation has brought out as a critical dispute. This research mainly focuses on the argument regarding whether the US government’s further regulation of the airline industry will help avoid more airline bankruptcies. The paper provides evidences of negative impacts resulted from the deregulation, especially on bankruptcy issue, and proposes possible financial strategies such as setting up a fare range, avoiding cut-throat competition, and signing contracts for steady oil prices in order to solve the problems that airlines currently face. After considering as much information as possible, the paper concludes that moderate intervention should be the next step that government takes.

Introduction

The airline industry was regulated for a long period of time by Civil Aeronautics Board (CAB) in both economical side and industrial side. Civil Aeronautics Board is a federal government agency that executes to control the air transportation in the United States, which restricted the airline industry on fare prices, free competitions, and flight routes. In 1978, the Airline Deregulation Act was signed to decentralize the Civil Aeronautics Board’s control, which opens up the market for private airline companies. Many new companies get into the airline industry, which leads to a free competition market environment. Thus, the impacts from the Airline Deregulation Act have been questioned since then. (Smith Jr. & Cox, 2008)

Many studies have already discussed similar topics regarding the potential advantages and disadvantages of the Airline Deregulation Act (Bailey, 1992; U.S. GAO, 1996; Poole & Butler, 1998; Goetz & Vowles, 2009; Howell, 2010;