AIRTECOMMAN - QUIZ 1 Reviewer

STAGE 1 Regulation

STAGE 1 Regulation

Heavy government control of airfares, routes, and market entry.

STAGE 2 Liberalization

Reduced government control; increased bilateral negotiations.

STAGE 3 Deregulation

Removal of government controls like entry and pricing.

STAGE 4 Re-regulation (2007)

Discussion of reintroducing government control in the U.S. airline industry.

September 11, 2001

Since the terrorist attacks on the United States on________________________, four Phases Post-9/11 were formed: Survive, Adapt, Recover, Rethink.

Rethink Phase

Ongoing enhancement of business models.
Flexibility for scenarios like globalization, political changes, natural resource distribution, terrorism, and financial instability.
Airlines - "businesses where only the fittest survive"

Top 5 Frustrations in Aviation

1. fuel and oil
2. pollution control
3. personnel cutbacks
4. global economic woes
5. recurring safety lapses

NEGATIVE SCENARIOS IN THE GLOBAL AIRLINE INDUSTRY

- 2003 Severe Acute Respiratory Syndrome (SARS) outbreak.
- Iraq War and Afghan War
- 2008 financial crisis

Top three costs for most airlines in any order

- fuel
- labor
- maintenance.

Economic Link

Airlines connect regional and global economies.

Domino Effect

Success or failure in one region impacts others.

INDUSTRY CHALLENGES AND STRATEGIES External Forces

Physical, economic, political, socio-cultural, demographic, technological.

Undercapitalization

Insufficient funds for operations/startups.

Overexpansion

Pursuit of size over efficiency.

Lack of Flexibility

Legacy carriers struggle to adapt to new environments.

"Wrong" Money/Leadership

Mismatched investors or leadership roles.

No Competitive Advantage

Bigger isn't always better; market dominance often prioritized over profitability.

Revenue/Profitability Issues

Failure to demonstrate growth and meet market needs.

1918 - 1938

The Formative Period

1923

Regular service routes established.

Contract Air Mail Act (1925)

Authorized private contracts for air mail transport.

Air Commerce Act (1926)

Introduced federal regulations for aircraft, airmen, navigation, and traffic

CAM

Contract Air Mail

Feeder routes operated by contractors; led to the formation of airlines

- Colonial Airlines (CAM 1) → American Airlines. (between New York and Boston)
- Western Air Express (CAM 4) → TWA. (from Los Angeles to Salt Lake City)
- Northwest Airlines (CAM 9). (from Chicago to Minneapolis)
- United Airlines (CAM 5- Operator: Varney Speed Lines; and CAM 8- Operator: Pacific Air Transport).

Air Mail Act (1930)

- Consolidated mail routes; monopolized the industry.
- Three main mail routes—Central, Northern, and Southern—out of the original CAM routes were established and assigned to three airlines

Air Mail Act (1934)

Reauthorized contracts; barred prior holders, forcing reorganization.

December 1, 1935

On ___________________________, the first airway traffic control center was formed in Newark, New Jersey, to inform by radio all pilots in the vicinity as to the whereabouts of other air traffic during instrument conditions

1938 - 1958

The Growth Years

- Post Office Department, Commerce Department, Interstate Commerce Commission

Three agencies held power over air commerce in various intertwined areas

Civil Aeronautics Act (1938)

Created Civil Aeronautics Authority (CAA) for centralized regulation.

Technological Advancements

- WWII innovations- Modern air traffic control with radar tech.
- 1952- First jetliner (de Havilland Comet).
- Boeing B707 development begins, signaling the dawn of a new age in aviation

Flight Personnel Certification (1947)

New classes of flight personnel were charged: radio operators, navigators, engineers.

1956

By ______, the CAA recognized the inevitable and held a conference to plan for the jet age:
- Triggered by the collision of two aircraft over the Grand Canyon and similar accidents, a law creating a new Federal Aviation Agency (FAA):
- Established after accidents like the Grand Canyon collision.
- Centralized civil and military aviation control.

December 30, 1969

Boeing 747 was certified ("wide-body" era).
- It was able to carry about 380 passengers in an 8- or even 10-abreast, twin-aisle, mixed-class layout

Lockheed L-1011, McDonald Douglas DC10, Airbus A300

Advanced jets introduction

Flight recorders, weather radar, terrain-avoidance systems

After advanced jets introduction, the airline industry has introduced one technological advancement after another

Airline Deregulation Act (1978)

Introduced new challenges, marking the end of the regulated era

Air Mail Service (May 1918)

Experimental routes by Post Office and Army.

Contract Air Mail Act (February 2, 1925)

- known as "Kelly Act" birthed the airline industry.
- This law authorized the postmaster general to contract with private individuals or companies engaged in air transportation service for the transportation of air mail
- Amended in 1926 to raise compensation rates.

Air Commerce Act (1926)

- Also known as the Bingham- Parker Act
- Stabilized and fostered commercial aviation.
- Established federal oversight for development.

July 1927

a director of aeronautics was appointed, who was in charge of the work of the Department of Commerce in the administration of the Air Commerce Act

Division of Air Navigation, Division of Air Regulation

An administrative order of the secretary of commerce provided for the establishment of the Bureau of Air Commerce in 1934

McNary-Watres Act (1930)

- Passed by Congress on April 29, 1930
- Gave the postmaster general control over air mail route systrem.
- Allowed route extensions or consolidations for public interest.

Air Mail Act of 1934 (Black-McKellar Act)

- Passed on June 12, 1934
- Created temporary contracts regulated by the ICC.
- Separated manufacturers from airlines, banning interlocking directorates and mutual stock holdings.

Air Mail Contract Scandal (February 1934)

- Postmaster general annulled domestic air mail contracts due to conspiracy to defeat competitive bidding concern.
- Temporary mail transport assigned to the U.S. Air Corps.

Air mail contractors, Fixed-base operators

By 1938, two general categories of "air carriers" had developed:

The Civil Aeronautics Act of 1938

- Signed by President Roosevelt on June 23, 1938.
- Created three administrative bodies-
- A five-member Civil Aeronautics Authority (CAA): Regulated economic and safety matters.
- A three-member Air Safety Board: Investigated accidents.
- Administrator: Oversaw navigation facilities and aviation promotion.

Civil Aeronautics Board (CAB)

In 1940, Air Safety Board dissolved; functions transferred to CAA and CAA renamed ______________________________.

Federal Aviation Act of 1958

- President Eisenhower initiated the act after midair collisions.
- Established the Federal Aviation Agency (FAA) with control over U.S. airspace.
- was given authority over the nation's airspace
- Combined the functions of the CAA and other agencies.

Department of Transportation

In 1967, Congress created the Department of Transportation and the FAA was placed under the ______________________________________.

The Deregulation Movement

Gained momentum in the 1970s due to inefficiencies, high costs, and fuel crises.

Arab oil embargo of 1973

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

The Airline Deregulation Act of 1978

- The new law contained entry-related provisions that liberalized the preexisting regime, including the following:
- Domestic Fill-Up Rights:
- Allowed international carriers to transport domestic traffic on certain legs of their routes (e.g., LAX-NYC).
- Removal of Restrictions:
- Eliminated "closed-door" restrictions (e.g., airlines could now carry traffic between intermediate stops).
- Suspension and reduction of service:
- Made it easier for carriers to reduce or suspend service.

December 31, 1981

- Ultimate liberalization of entry occurred
- Only requirement for entry: Carrier must be "fit, willing, and able".
- All airlines and potential airlines gained the freedom to serve or stop serving any domestic routes.

fit, willing, and able

Only requirement for entry- Carrier must be "_____________________________".

Essential Air Service Act

- Ensured that all cities listed in any certificate would receive essential air transportation.
- Subsidies provided when necessary through an application and compensation process.

January 1, 1985

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)

December 1978

Braniff Airlines launched service to 16 cities in one day.

March 1985

Mergers picked up again in _________________.

Post-Deregulation Growth

Surge in regional airlines entering the market in the early 1980s.

1985

Dramatic growth in code-sharing agreements with major carriers (e.g., Continental Express, United Express, American Eagle).

757 and 767

During Boeing's Innovations they introduced the ____________________ to counter Airbus competition.

ETOPS certification

enabled extended twin-engine flights (e.g., transatlantic).

737

In 1987, the _____________became the most-built jetliner, surpassing the 727.

747-400

In 1988, the ____________________ debuted, with seating for 660 passengers in an all-economy configuration.

2011

Intense competition for dominance between airbus and boeing in sales persisted by __________________.

September 11, 2000

A New Era in Aviation (Post-9/11 Aviation Era)

general aviation pioneers

Fixed-base operators established after the passage of the Air Commerce Act in 1926 became the first "_________________________________", engaged in
- Flight instruction
- Aircraft and fuel sales
- Maintenance services

AOPA (Aircraft Owners and Pilots Association)

had 22,000 members (mid-1940s) → 387,000 members (2002).

General Aviation Fleet

Grew to 95,000 aircraft by 1965; production reached 11,852 new aircraft that year.
The business jet and turboprop were introduced to corporate users, establishing "Business Aviation"

GAMA (General Aviation Manufacturers Association)

Established in 1970 to advocate for GA manufacturers.

Gulfstream

In 1957, ______________________ were introduced, the first turbine-powered airplane for business use.

1958 - 1978

Maturity - Jets Arrive