The History of Deregulation of Aviation in the Airline Industry Research Paper

The History of Deregulation of Aviation in the Airline Industry - Research Paper Example According to Smith & Cox (2007), one decade of airline decontrol implementation led to 35% growths in the airline industry, through increased employment and passenger travel. The two economists say that traveling increased by 55 %, as the real travel cost decreased by approximately 17% in the major routes. They found that by the second decade, ticket prices decreased by 20% in real terms, while passengers served were 324 million. Historically, airline services were partially regulated, because of oligopoly and monopoly concerns, as only a few airlines provided flights that were direct between cities. The aim of the US airline deregulation was to control entries and reduce prices in the transport system in the United States. Since then, many other nations have seen the need to deregulate their domestic airline markets, and this has effectively been applied in European Union airline markets. Today a big number of international airline markets are subject to tight airline regulations. In the United States, airline deregulation was born from the 1925 Air Mail Act and the 1926 Air Commerce Act. Serious commercial aviation economic regulation began in 1938 with Civil Aeronautics Act passage. The creation of the Civil Aeronautics Board (CAB) gave it the power to regulate and control airline routes as well as market entry and exit, and mandate service rates. Later, airline safety regulation was passed together with the 1958 Federal Aviation Act that bore Federal Aviation Administration. By 1938, US government was regulating much commercial aviation in terms of routes, schedules, and fare. The three main functions of the CAB are regulating airline route, limiting new market entrances by air carriers, and regulation  of passenger carriers.