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Airline Deregulation Act of 1978

Posted by Admin   |   On October 28, 2011   

Airline Deregulation Act of 1978


The Airline Deregulation Act of 1978 phased out the Civil Aeronautics Board 's economic regulation of the airlines, and the CAB ceased to exist at the end of 1984.

The Airline Deregulation Act of 1978 phased out the federal government's control over airfares and services, relying instead on competitive market forces to determine the price, the quantity, and the quality of domestic air service.

Before 1978, the Civil Aeronautics Board regulated airlines, controlling the fares they could charge and the routes they could fly. Legislatively mandated to promote the air transport system, the Board believed that passengers traveling shorter distances--more typical of travel from small and medium-sized communities--would not choose air travel if they had to pay the full cost of service. Thus, the Board set fares relatively lower in short-haul markets and higher in long-haul markets than would be warranted by costs. Concerned that such practices caused inefficiencies and inhibited the growth of air transportation, the Congress deregulated the industry. Deregulation was expected to result in (1) lower fares at large-community airports, from which many trips are long-distance, and somewhat higher fares at small- and medium-sized-community airports; (2) increased competition brought about by new airlines, commonly referred to as "new entrant" airlines; and (3) greater use of turboprop (propeller) aircraft by airlines in place of jets in smaller markets that could not economically support jet service.

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