Flying the Not-So-Friendly Skies: How Airline Deregulation Negatively Affected America

Boeing 707s of Pan Am and TWA, two of the biggest airlines in pre-deregulation America.

Air travel, without a doubt, is not what it used to be. An industry which once boomed, attracting Americans with wonder and luxury, has now become chaotic and stressful. We can trace these attributes back to the root and the main problem: Airline deregulation. Airline deregulation is the current approach to the air travel industry, where the government stays hands-off of the airlines, giving no financial support or regulations. To better understand why this is a problem, we must first go back into history, where people wanted to fly, not had to.

Air Travel in History:

America’s air industry, like a dog straining at its leash, was fully unleashed in 1938. President Franklin Roosevelt passed the Civil Aeronautics Act. This act gave the Civil Aeronautics Board, hereafter known as the CAB, full power over commercial aviation. The CAB regulated airfares, decided which airlines could exist, which could fly certain routes, and more (“Civil Aeronautics Act”). The CAB provided major air carriers with a government-funded monopoly in the air travel industry, and these airlines flourished, bringing in millions of passengers each year. The CAB granted certain routes to certain airlines which could be trusted to bring in the most money for the government. For example, in 1980, US-based Capitol International Airways started service from New York to Paris, a highly profitable route between two major cities, under the approval of the CAB (“C.A.B. Grants Paris Route”). Capitol International Airlines proposed to fly an all-economy flight between the two cities, a choice which would attract many middle class Americans, gaining immense revenue  (“C.A.B. Grants Paris Route”). However, the CAB had some major flaws. In order to generate the most money, airfare costs were often high, and efficiency was compromised. As Senator Edward Kennedy summarized in 1985 after a hearing on the CAB and administrative procedure, “The airline industry is potentially highly competitive, but the Board’s system of regulation discourages the airlines from competing in price and virtually forecloses new firms from entering the industry. The result is high fares and security for existing firms” (Kennedy). These “existing firms” were the four major airlines which flourished under the CAB: Pan Am, TWA, Braniff International, and Eastern Airlines. Other airlines found it hard to compete with the protected carriers, and subsequently went out of business. By the turn of the 1970s, many felt that the CAB was obsolete, and that it was time for a much-needed change.

For more information, visit my paper on the history of airline deregulation here.

The Air Travel Industry Becomes Deregulated:

After airline deregulation, airline advertisements spiked, as companies were trying to keep their businesses alive and their planes in the air. However, it did not work, and by the mid 1980s, advertisements dropped as airlines went out of business or merged due to airline deregulation

America grew tired of the raised fares and limited routes and airlines, and decided that the CAB needed to go. In 1978, president Jimmy Carter signed the Airline Deregulation Act of 1978. Backed by bipartisan support, this act effectively dissolved the CAB, opening up a free market in the airline industry (“Deregulation: A Watershed Event”).  The four major carriers protected by the CAB were forced to sell routes to upcoming carriers in order to stay in business, as their outdated business models, shaped by the CAB, could not compete with unrestricted airfares and benefits which came with deregulation. The act introduced the world of Low Cost Carriers, or “budget airlines,” such as Southwest Airlines (Field), which thrived in the airline industry. These budget airlines bought routes sold by Pan Am, TWA, Braniff International, and Eastern Airlines. But the major four carriers crashed and burned in the free market due to the lack of domestic lines (Unnikrishnan), taking with them the heaps of money they generated. However, it seemed as if the airlines themselves were not the most affected. Instead, that title went to the industry’s workforce. In 1980, there were roughly 360,000 employees in the airline industry. In just three years, that number dropped to 325,000. When Pan Am and Eastern Airlines declared bankruptcy, they let go 15,000 employees each (James). Furthermore, worker wages decreased as major airlines struggled to maintain profit. In 1984, the average salary in the airline industry was $44,000. In 1985, it went down to $43,500, and dropped from there (James).  In addition, the rise of the domestic airlines introduced the hub-and-spoke model. This model revolved around the idea of airlines having certain “hubs” or headquarters, and servicing smaller cities, or “spokes,” from those hubs (“Was Deregulation Bad?”). This model devastated the economies of many spoke cities, such as Cincinnati and Pittsburgh, because they are not flown to as much as bigger cities, and in turn generated less money for those cities (Amadeo).

“We keep demanding of the airlines that they provide low fares, and one of the ways they do that is by tightening up the seat rows, by reducing the amount of food, by reducing the number of flight attendants. Then we complain about it.”

-David Stempler, president of the Air Travelers’ Association (Ho).

Modern-Day Air Travel:

Boarding roulette: in 2016 over 430,000 people voluntarily gave up their seats due to overbooking. Imagine how many more people were denied boarding or involuntarily gave up their seats.

In October of 2018, the US Department of Transportation received more than 1,200 airline passenger complaints, ranging from overbooking to flight problems to customer service (Air Travel Consumer Report). These complaints are direct results of the Airline Deregulation Act of 1978. For example, 42% of respondents to a 2018 International Air Travel Association survey said they would want to be able to carry more luggage on their flights (Garcia). Charging for luggage is one major cost-cutting measure airlines implemented to keep fares low after the Airline Deregulation Act of 1978. In fact, a 2019 TripAdvisor report found that Southwest Airlines was the only US Airline to offer any sort of free luggage on board (“Airline Baggage Fees”). Not coincidentally, Southwest is ranked the highest out of all US Airlines in customer satisfaction (Bloom). Why? Because it appeals to its customers. It can afford low fares, and still gives passengers simple “luxuries,” like allowing two free bags, as well as free snacks. But modern air transport goes much deeper than just free snacks and baggage.

Another main problem caused by airline deregulation is overbooking. Overbooking is when an airline sells more seats than are available. Airlines do this for profit, so they can keep airfares low. A direct cause of the Airline Deregulation Act of 1978, overbooking happens daily, and causes hundreds, if not thousands of people problems every single day. For example, in 2015 alone, 46,000 people were “involuntarily bumped off flights” (Horowitz). After the Airline Deregulation Act of 1978, airfare prices dropped drastically, and carriers scrambled to find ways to afford and push these low fares. So, they started overbooking. They realized that some passengers would not show up for their flight, and that these “no-shows” would cost them money. Therefore, airlines started selling more seats in anticipation for this. However, overbooking is gaining national media attention, and the aftermath does not look good. In April 2017, a doctor was forcibly dragged off a United Airlines flight from Chicago to Louisville due to overbooking (Horowitz). This event gained national attention, and just a few days after, United Airlines’ stock had dropped 6.3% — a loss of $1.4 billion (Shen). Thus, airline deregulation is at direct fault for overbooking — a cheap and almost inhumane business tactic.

In just a few hours after United’s overbooking incident, the airline’s stock dropped tremendously as the media got wind of this atrocious overbooking story.

Individuals are not the only ones affected by airline deregulation. Whole cities are affected, due to the rise of the hub-and-spoke model. The hub-and-spoke model is a “radial system of routes. The central [headquarter] city could be considered the hub of a wheel with spokes to the outlying feeder cities” (Toh). In simpler terms, an airline operates all of its flights out of one “hub” city, and flies from there to smaller, less traveled “spoke” cities. After the Airline Deregulation Act of 1978, airlines found it cheaper to adopt the hub-and-spoke model, as they can control a regional market and gain more money, while passengers have easier connections to flights (“Airline Deregulation and Hub-and-Spoke Networks”). However, this means that some spoke cities are disadvantaged by this, as less flights fly in and out of their airports directly to other cities (Bauer). Since airlines are taxed by cities for the amount of flights in and out, this means that the spoke cities end up losing money due to this model. Therefore, the hub-and-spoke model, which causes immense losses of money for spoke cities, and can even bankrupt the airlines which implement it, is a flawed model which stemmed from the cost-cutting desperation of post-deregulation air carriers.

For more information, visit my paper on the modern-day effects of airline deregulation here.

How We Can Improve Air Travel:

Though airline deregulation may seem like a problem of great enormity, there are simple actions the average traveler, as well as society as a whole, can take to combat this ever-growing problem.

One of the biggest actions airline passengers should take is to learn their Airline Passengers’ Bill of Rights. Passed in June of 2017, Congress Bill S. 1418, also known as the Airline Passengers’ Bill of Rights, combats or lessens some cost-cutting measures which were a result of the Airline Deregulation Act of 1978 (United States). For instance, sections 101 and 102 state that passengers must be given compensation if they are A) denied boarding because of overbooking or B) forced to give up their seat due to overbooking (United States). If each traveler knows their rights for air travel, then they can demand their compensation, the airline’s plan to get them to their destination, and more vital information in case something goes wrong on a flight. Each traveler should know their rights, as it would make air travel more seamless, and prevent any injustice played by airlines on unsuspecting passengers.

Watch this video on airline law, the history of Airline Deregulation, and passenger rights.

As a whole society, we can lobby our local congressmen and congresswomen to pass a vital law which would reduce the negative effects of the hub-and-spoke model. The government would enforce that airlines set up hubs in smaller cities which are in need of an economic boost. By doing so, the airlines would open up jobs for hundreds, if not thousands of people in each new hub. Furthermore, more planes would fly in and out of those airports, which means that the new hubs will make more money due to landing and take-off fees, giving the cities the much-needed economic boost. It would lift up struggling cities, introduce more jobs, and bring in more money, which could be used to increase infrastructure, or support another growing industry in those cities. On the passengers’ side, more hubs will mean less congestion and wait times at major hubs, giving travelers all over the country a fast and hassle-free travel experience. Overall, if we as a society lobby for the passing of this law, we can change the course of modern-day travel — for the better.

For more information, visit my paper on the solutions to the problems airline deregulation caused here.

My Interest in Airline Deregulation:

As an avid aviation enthusiast, I have always been interested in air travel and how it has changed over the decades. Ever since I could talk, I have always wanted to be a pilot, and wondered why nobody liked to fly anymore, as it seemed so captivating to me. Furthermore, my grandmother was a flight attendant for Indian Airlines in the 1960s, and still remembers the age when passengers wanted to fly, not had to fly. I wanted to investigate this topic further because it was a focal turning point which ended the era when flying was enjoyable and regulated.

For more information, visit my personal interest essay here.

Works Cited

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  1. April 26, 2019 by Cooper Reply

    Hi! This web page was really informative, fluid, and fun to read. I never knew that flights used to be so expensive (and so fun too). I wonder if there is a way to balance the best of both regulated and deregulated airlines: could it be cheap, but more comfortable? I think that knowing your rights is a great idea, and I have heard that the government should also set regulations on the size of each seat, food, etc in order to make flights more enjoyable. Do you think this would be a good idea? Also, I think reducing the hub and spoke model to help smaller cities is a really good idea. Thanks for a great webpage!

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