Effects of Deregulation on the Airline Industry

Guest Article by J.R. Hauptman

Airline deregulation came about in the late nineteen-seventies because the Civil Aeronautics Board, which regulated that industry, had become too politicized. The CAB decided what airlines would fly what routes, at what frequency and what fares they could charge. Presidents Johnson and Nixon, having the powers of appointment, approval and veto, used this vital component of our national transportation infrastructure to reward their political allies and to likewise punish their enemies. The ideal solution would have been to reform the industry and allow more competition in route awards and fares, but the action chosen was the Airline Deregulation Act of 1978. 

The promoters of airline deregulation proudly declared that the Act would result in free market entry by both established and startup companies, more competitive fares, better airline service and cheaper tickets for traveling Americans. An added benefit foreseen by economic "conservatives," would be an anti-inflationary check on airline employee wages in this highly unionized industry. They salivated over the prospect of putting the final screws into the coffins of labor unions. 

Rather than recount the past three decades of instability in the airline industry, let’s look at the results. First, the concentration of the industry. Promoters of deregulation simply ignored the fact that the airline business is extremely capital intensive; it takes a lot of money to operate a modern fleet of jet airplanes while maintaining flight frequency, safety, and reliability. Further, free market entry by small upstart airlines was nipped in the bud by a Darwinian fact of economics; the Big Fish eat the Little Ones. The big carriers, having huge cash reserves, simply undercut the fares of the low cost carriers and ran them out of any competitive markets. The result is, that eventually, the industry went from many high quality carriers serving large, medium and small market cities to a few major carriers, deemed "too big to fail," skimming the long haul routes, leaving the medium and small markets to be served by contract carriers operating smaller, regional jets. 

Second, was the overall degradation of service. Economic gurus touted the idea that airlines were finally solving the problem of excess capacity, or "too many empty seats." The problem was and continues to be that with fewer major carriers dominating "Hub" markets, they are not only able to fill those empty seats, it is established practice to cram even more seats into airplanes, making current air travel an exercise in torture. Additional factors, such as fuel prices, weather delays and security issues only exacerbate these problems and make the travel experience even more unpleasant. 

That brings us to the favorite subject of all of us who work or travel in the air, airline safety. The safety problems range from flight crew fatigue and training, to the over capacity operation of the Air Traffic Control system, to the sub-contracting of flight operations, to aircraft maintenance and certification itself. The recent crash in Buffalo points to at least three of these factors. 

Airline bankruptcies resulted in massive relocation of thousands of the most experienced and formerly senior pilots who were forced seek jobs at upstart carriers where they were junior to less experienced pilots. These carriers often work their pilots as close as possible to the legal limits of flight and duty time, often blithely ignored by the FAA.

Technological advances in GPS navigation and cockpit Flight Management Systems have made vast improvements to aircraft operations but unfortunately the infrastructure of the government operated Air Traffic Control System has not kept pace. The technology has enabled transcontinental flights to save time and fuel but the delays incurred while arriving and departing high density areas such as the northeast U.S., Chicago and Southern California soon gobble up profits. The Aviation Trust Fund, supported by taxes on airline tickets and aviation fuel has been routinely raided by politicians supporting their own pet projects, preventing updating of the system.

The FAA is also guilty of routinely ignoring violations of its own maintenance regulations. The worst example is the show orchestrated by the FAA regarding the controversy over the spacing of the electrical bundle ties on one model of aircraft flown by a major carrier. Grounding this aircraft fleet was a farce, intended to divert attention from other violations and carriers. 

If you have lately had concerns about the rash of accidents involving the aircraft of one particular aircraft manufacturer, your fears are well founded. The airline pilot’s internet grapevine hums daily with horror tales of flight computer glitches, structural failures and hair-raising crosswind landings, all involving one family of "dirty birds." What does this have to do with Airline Deregulation? Our government decreed to us "cheap tickets." Having eked the last penny from employee wages and facing volatile fuel prices, the only way to guarantee "cheap tickets" was to certify "Cheap Airplanes!" 

Deregulation of the securities and banking industries has led to a disastrous meltdown of our economic system. Unfortunately, we can look forward to more of the same in deregulated air travel. 

J.R. Hauptman (pseudonym), author of The Target: Love, Death and Airline Deregulation, has been a professional pilot for nearly a half century.  Barely twenty years old, he began as a military pilot and for almost two years he flew combat support missions in the Viet Nam War.  Upon leaving military service he was hired by a major airline and was initially based on the West Coast.  His flying career was interrupted by the turmoil that racked the airline industry during the early days of deregulation.  In the interim, he worked as a travel agent, a stockbroker and even trained dogs and horses.  In the late nineteen-eighties, he returned to aviation, flying jet charters and air freight.  He concluded his career flying corporate jets and now lives in Florida.  He is completing his second work, a non-fictional social  commentary and surfs every day, waves or not. You can visit his website.