[FUNAV] M1 (P4): Air Transportation (The Federal Aviation Act - Post-deregulation Evolution)

President Eisenhower

[The Federal Aviation Act of 1958]

In 1958, ________, citing midair collisions of aircraft that had caused a number of fatalities, asked Congress for legislation to establish “a system of air traffic management which will prevent within the limits of human ingenuity, a recurrence of such accidents”

• It was given authority over the nation’s airspace

• Combined the existing functions of the CAA and other governmental agencies and departments

[The Federal Aviation Act of 1958]

The Federal Aviation Act of 1958 established the Federal Aviation Agency (FAA): (2)

CAB

[The Federal Aviation Act of 1958]

retained its jurisdiction over route allocation, accident investigation, and fare applications

FAA administrator

[The Federal Aviation Act of 1958]

The ________ wielded essentially all the powers and duties his predecessor had under the 1938 act, plus a clearer authority to allocate the navigable airspace between military and civilian users.

Federal Aviation Administration

[The Federal Aviation Act of 1958]

The FAA as such was in effect abolished, and in its stead was established within the new department a ________, headed by an administrator

Department of Transportation

[The Federal Aviation Act of 1958]

The FAA’s functions were transferred to the ________, where, for the most part, they were placed under the Federal Aviation Administration, where they remain today

National Transportation Safety Board

[The Federal Aviation Act of 1958]

The Department of Transportation Act also transferred the CAB’s accident-investigating and related safety functions to the new department and re-delegated them to a new independent agency called the ___________.

The Deregulation Movement

Air regulation gradually came under increasing criticism, particularly from economists

CAB pricing policies

[The Deregulation Movement]

were increasingly viewed as fostering inefficiency, higher costs, and higher prices:

– Several intrastate carriers in California and Texas (not regulated by the CAB) charged lower per-mile fares for comparable distances than the CAB-regulated airlines and operated more profitably

The Arab oil embargo of 1973

[The Deregulation Movement]

______ and the ensuing massive increase in fuel costs advanced the Deregulation movement

1975

[The Deregulation Movement]

The CAB itself recognized the need to deregulate the industry in a report released in ______.

The Carter administration

[The Deregulation Movement]

________’s support for deregulation was an important factor, but the movement was also aided by improved industry profitability

Subcommittee on Administrative Practice, Senator Edward Kennedy

[The Deregulation Movement]

An influential report was released by the ________, and Procedure of the U.S. Senate Judiciary Committee, headed by _________, coming to the same conclusion

The Deregulation Movement faced opposition because people feared it could reduce safety, hurt service to smaller communities, cause aggressive price wars, limit investment in new technology, disrupt convenient services, and negatively affect airline employees. In short, opponents worried deregulation’s competition benefits might come at the cost of safety, quality, and jobs.

The Airline Deregulation Act of 1978

The new law contained entry-related provisions that liberalized the preexisting regime

Domestic fill-up rights on international flights

[The Airline Deregulation Act of 1978]

For example, an international carrier flying from Los Angeles to Rome via New York could be given authority, even though not previously possessed, to carry domestic traffic between Los Angeles and New York on at least one round-trip flight a day

1.Domestic fill-up rights on international flights

2.Removal of restrictions

3.Suspension and reduction of service

The Airline Deregulation Act of 1978, The new law contained entry-related provisions that liberalized the preexisting regime, including the following: (3)

Removal of restrictions

[The Airline Deregulation Act of 1978]

All “closed-door” restrictions contained in domestic certificates were eliminated. Thus, if an airline was authorized to fly from City A to City B to City C but prohibited from carrying traffic from B to C, that restriction was eliminated

Suspension and reduction of service

[The Airline Deregulation Act of 1978]

Provisions were adopted that greatly simplified the ability of carriers to reduce or eliminate service

December 31, 1981

[The Airline Deregulation Act of 1978]

The ultimate liberalization of entry occurred, as scheduled, on _________, when the sole barrier to unrestricted domestic entry was the requirement that the applicant be “fit, willing and able” —a finding that had already been made for all existing certificated airlines

For all practical purposes, all airlines (and virtually all would-be airlines) are now free to serve, or to cease serving, any and all domestic routes and cities

Essential Air Service Act

[The Airline Deregulation Act of 1978]

Congress enacted the __________:

• All cities named in any certificate are automatically eligible

• Whenever it is found that a city will not receive essential air transportation without subsidy inducement, applications to perform subsidized service must be sought and an award made at an established rate of compensation

January 1, 1985

[The Airline Deregulation Act of 1978]

On ________, the CAB ceased to exist altogether, and its authority over subsidies and foreign air transportation was transferred to the U.S. Department of Transportation (DOT)

• Increased merger activity

• Establishment of new carriers

• Increased affordability of air transport for the general public

A series of major changes occurred in the industry’s structure due to deregulation: (3)