The Policy Cycle: Airline Regulation and Deregulation

I. Overview

It is said that “policymaking is an extremely complex process without beginning or

end.” Complex it indeed usually is. However, one can pretty effectively date the beginning
and end of policies like that of the Civil Aeronautics Act. The Civil Aeronautics Board
(CAB) established in 1938, once tightly regulated interstate airlines. No new trunk airlines
were certified after CAB was formed in 1938, and vigorous competition among the
regulated carriers was expressly prohibited. Airlines were assigned specific routes and
service areas and given formulas governing the fares they could charge and the profits they
could earn. They were even subject to rules prescribing the kinds of aircraft they could fly
and their seating configurations. Airlines reflected the capture theory of regulation.
Despite opposition from the existing airlines and labor unions, Congress
deregulated airlines in 1978, thereby allowing price competition and new entry. The Airline
Deregulation Act initially made it easier for airlines to enter new routes and gave them
flexibility in setting fares. Competition helps keep airfares lower. The airlines could also
afford lower fares because they became more efficient by filling a greater percentage of
seats.
II. Statement of the Problem
How does the Airline Deregulation Act has been implemented that it results to increasing
problems?
III. Statement of Objectives
1. To know if there is a need to continue the Deregulation Act.
2. To be able to determine the possible action needed to address the increasing
problems.
IV. Statement of Facts
1. The control of domestic air travel has become more oligopolistic.
 2. Following deregulation, many new airlines entered the industry, but within a few
years almost all of them either had failed or had been absorbed by major airlines.
3. Many small cities have lost some or all of their air service or no longer receive jet
service.
4. The number of seats and flights available to travelers have increased, but the airplanes
are more cramped and crowded.
5. Meals and other amenities have been reduced.
6. Deteriorating service and sometimes expensive and often confusing airfares.
7. Flight times on many routes have increased, resulting to delays.

SWOT Analysis

REGULATION

STRENGTHS WEAKNESSES THREATS OPPORTUNITIES

-They are associated -High air fares, -Competition of airline -Create social value
with public acceptance accommodates only industries.
because of the quality few passengers which -Economic factors
of their service. will result to non- influence the progress
revenue producing. of airline industry.

DEREGULATION

STRENGTHS WEAKNESSES THREATS OPPORTUNITIES

-They are free to set -The quality of their -Small airlines was -Many new airlines
their own policies. service has been later absorb by major entered the industry.
deteriorate. airlines.
V. Alternative Courses of Action
1. Evaluate the Deregulation Act.
2. Re-imposition of the regulation and changing of members of Civil Aeronautics Board
in order to address problems that exist during the time of deregulation.
3. Do nothing.
VI. List of Advantages and Disadvantages
1. Evaluate the Deregulation Act.
Advantages:
 There is a possibility that the problems will be eliminated or minimized.
 The policy will be properly implemented.
 The root cause will be identified.
Disadvantages:
 There is a tendency that the problem will not be solved.
 There will be a lot of process to strengthen the company’s policy.
 It will need a deeper evaluation in order to assess the problems.

2. Re-imposition of the regulation and changing of members of Civil Aeronautics

Board in order to address problems that exist during the time of deregulation.
Advantages:
 More rational pricing system for providing and allocating airport and airway
capacity.
 More organized and equitable.
 There will be no threat to job security.
 Reduce or eliminate self-interest threat among the members.
Disadvantages:
 It takes time and effort to re-impose the regulation.
 It will involve more persons.
 3. Do nothing.
Advantages:
 The government will just sit and relax.
 No time and effort needed.

Disadvantages:

 The problem will not be solved.

 There will be no changes.

VII. Conclusion
Among the given alternative courses of action, the ACA number 2 should be used
compared to other ACA’s. This ACA covers all the possible solutions to address the
increasing problems of the airline industries.
VIII. Recommendation
Every time an airline does something that people don’t like, there are always calls
to re-regulate the industry. The regulation of Civil Aeronautics Board is acceptable but due
to inflation and economic issues problem exist. The major concern of the airline industries
is the safety and comfortability of the customers. The main role of CAB is to serve public
interest. However, instead of dealing the public they are more concerned on serving their
own interest. In addition, the new CAB members support the deregulation. Various actions
were taken to lessen CAB control of airline rate and route decisions so as to increase
competition in the industry. For instance, it became much easier for airlines to obtain new
routes and to initiate or terminate service on unprofitable routes at their own discretion.
Therefore, re-imposition of the regulation and changing of members of Civil Aeronautics
Board in order to address problems that exist during the time of deregulation is the best
alternative course of action. Upon the re-imposition of CAB’s regulation there will be
changes. It is advantageous because more rational pricing system for providing and
allocating airport and airway capacity, it will be more organized and equitable, there will
be no threat to job security, and it will reduce or eliminate self-interest threat among the
members.
IX. Implementation
1. Change the members of Civil Aeronautics Board
 Make a criterion for choosing a member or choose a member through election.
2. Review the present policy of Civil Aeronautics Board.
3. Identify the problem that exist.
4. Consider the repercussion that affect the public.
5. Re-impose the regulation.
 Make a standard that is fair and equitable and applicable to all airline industries.
 Congress should enact legislation designed to limit the CAB’s powers to control
prices and restrict entry.
 CAB should conduct a hearing about whether or not it ought to adopt to a more
restrictive route policy.
 Through hearing, the public will have the opportunity to argue and the Board will
be expose to a variety of other positions about the best way to cure industry
problems, and the affected parties might then have appealed an adverse decision
to the court.