Airline Deregulation Legislation Act 1978 <





Airline Deregulation Legislation Act 1978

The Airline Deregulation Act is a United States federal law signed into law on October 24, 1978. The main purpose of the act was to remove government control over fares, routes and market entry (of new airlines) from commercial aviation.

The Civil Aeronautics Board's powers of regulation were to be phased out, eventually allowing passengers to be exposed to market forces in the airline industry. The Act, however, did not remove or diminish the FAA's regulatory powers over all aspects of airline safety. The effects of this Act.


Senator Howard Cannon of Nevada introduced S. 2493 on February 6, 1978. It passed and was signed by Carter, becoming Pub.L. 95-504 on October 24, 1978. 

The stated goals of the Act included

  • the maintenance of safety as the highest priority in air commerce;

  • placing maximum reliance on competition in providing air transportation services;

  • the encouragement of air service at major urban areas through secondary or satellite airports;

  • the avoidance of unreasonable industry concentration which would tend to allow one or more air carriers to unreasonably increase prices, reduce services, or exclude competition; and

  • the encouragement of entry into air transportation markets by new air carriers, the encouragement of entry into additional markets by existing air carriers, and the continued strengthening of small air carriers.

The Act intended for various restrictions on airline operations to be removed over four years, with complete elimination of restrictions on domestic routes and new services by December 31, 1981, and the end of all domestic fare regulation by January 1, 1983. In practice, changes came rather more rapidly.


Among its many terms, the Act:

  • gradually eliminated the CAB's authority to set fares;

  • required the CAB to expedite processing of various requests;

  • liberalized standards for the establishment of new airlines;

  • allowed airlines to take over service on routes underutilized by competitors or on which the competitor received a local service subsidy;

  • authorized international carriers to offer domestic service;

  • placed the evidentiary burden on the CAB for blocking a route as inconsistent with "public convenience";

  • prohibited the CAB from introducing new regulation of charter trips;

  • terminated certain subsidies for carrying mail effective January 1, 1986 and Essential Air Service subsidies effective 10 years from enactment (however, as of 2009, the EAS is still in existence, serving 146 communities in the U.S.);

  • terminated existing mutual aid agreements between air carriers;

  • authorized the CAB to grant antitrust immunity to carriers;

  • directed the Federal Aviation Administration (FAA) to develop safety standards for commuter airlines;

  • authorized intrastate carriers to enter into through service and joint fare agreements with interstate air carriers;

  • required air carriers, in hiring employees, to give preference to terminated or furloughed employees of another carrier for 10 years after enactment;

  • gradually transferred remaining regulatory authority to the U.S. Department of Transportation (DOT), and dissolved the CAB itself.

Safety inspections and air traffic control remained in the hands of the FAA, and the act also required the Secretary of Transportation to report to Congress concerning air safety and any implications deregulation would have in that matter. 

A 1996 Government Accountability Office report found that the average fare per passenger mile was about 9% lower in 1994 than in 1979. Between 1976 and 1990 the paid fare had declined approximately 30% in inflation-adjusted terms. Passenger loads have risen, partly because airlines can now transfer larger aircraft to longer, busier routes and replace them with smaller ones on shorter, lower-traffic routes.

However, these benefits of deregulation have not been distributed evenly throughout the national air transportation network. Costs have fallen more dramatically on heavily trafficked, longer-distance routes than on shorter, lighter ones. 

Exposure to competition led to heavy losses and conflicts with labor unions for a number of carriers. Between 1978 and mid-2001, nine major carriers (including Eastern, Midway, Braniff, Pan Am, Continental, America West Airlines, and TWA) and more than 100 smaller airlines went bankrupt or were liquidated—including most of the dozens of new airlines founded in deregulation's aftermath. 

For the most part, smaller markets did not suffer the erosion of service predicted by some opponents of deregulation. However, until the advent of low-cost carriers, point-to-point air transport declined in favor of a more pronounced hub-and-spoke system. The larger hubs were served with larger aircraft, the spokes with smaller. While more efficient for serving smaller markets, this system has enabled some airlines to drive out competition from their "fortress hubs." The growth of low-cost carriers such as Southwest Airlines and Pacific Southwest Airlines has brought more point-to-point service back into the United States air transport system, and contributed to the development of a wider range of aircraft types that are better adaptable to markets of varying sizes.  

The Need For Federal Aviation Regulation


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