What were the outcomes of the US Airline Deregulation Act?

After deregulation, airlines reconfigured their routes and equipment, making possible improvements in capacity utilization. These efficiency effects democratized air travel, making it more accessible to the general public.



The Airline Deregulation Act of 1978 fundamentally transformed the aviation industry by shifting control from the government to the free market. One of the most significant outcomes was a dramatic reduction in airfares; as competition increased, flying moved from being a luxury for the elite to a common mode of transport for the general public. This era saw the birth of the "Hub-and-Spoke" system, where airlines consolidated operations at major airports to increase efficiency and "load factors." While this led to more flight frequencies, it also resulted in increased airport congestion and the elimination of many direct regional routes. Another major outcome was the rise of Low-Cost Carriers (LCCs) like Southwest and later JetBlue, which pressured legacy carriers to unbundle services. However, the intense competition also led to a wave of bankruptcies and mergers, as many established airlines—such as Pan Am, Eastern, and Braniff—were unable to adapt to the new economic landscape. Today, the U.S. market is dominated by a few "mega-carriers," a direct long-term result of the consolidation triggered by deregulation.

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It is shown that deregulation in the air transport market has become a mainstream development, and that deregulation has changed aviation markets in many positive ways. Deregulation generally led to stronger competition, reduced fares, increased flight frequencies, more connections, and increased passenger numbers.

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The Benefits of Deregulation. The two most important consequences of deregulation have been lower fares and higher productivity. Fares. Between 1976 and 1990 average yields per passenger mile?the average of the fares that passengers actually paid?declined 30 percent in real, inflation-adjusted terms.

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The deregulation of transportation and telecommunications that occurred in the 1970s and 1980s succeeded in increasing competition, which lowered consumer prices and increased choices, and provided tens of billions of dollars per year in consumer benefits.

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Although all travelers are now enjoying lower fares, on average, as a result of deregulation, it is clear that travelers at large and medium hub airports have benefited more than those at small and nonhub airports.

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What do you think some of the minuses might be for airline deregulation? Deregulation of airlines and increased competition might lead to frequent employee layoffs to cut the costs. When firms go bankrupt or contract substantially in size, they lay off workers increasing temporary unemployment in the economy.

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Deregulation in the financial industry was the primary cause of the 2008 financial crash. It allowed speculation on derivatives backed by cheap, wantonly-issued mortgages, available to even those with questionable creditworthiness.

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After deregulation, airlines dropped cities that had once served as hubs and pulled out of routes that were unprofitable. Their actions caused a ripple effect—when airlines left, business moved too, since their workers and executives couldn't get around the country as easily.

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