Final Project Presentation:

Topic: IMPACT OF ‘DEREGULATION

ACT 1978’ ON AIRLINE INDUSTRY

Group Members:
ANEES UR REHMAN - 11408
MUHAMMAD SAAD ASIF - 11058
TAHA ALI - 12337
CONTENT:
What we'll discuss in this Presentation
History of Airline Deregulation Act of 1978

Deregulation: A Watershed Event

The Hub-and-Spoke System

Price & Service Quality

Competition between carries

Effects on Staff & Open Skies

About the History of Deregulation:

President Jimmy Carter signed the Airline

Deregulation Act into law on October 24, 1978,
the first time in U.S. history that an industry was
deregulated
The 1978 Airline Deregulation Act
partially shifted control over air travel
from the political to the market sphere.
The Civil Aeronautics Board (CAB),
which had previously controlled entry,
exit, and the pricing of airline services,
as well as inter carrier agreements,
mergers, and consumer issues, was
phased out under the CAB Sunset Act
and expired officially on December 31,
1984.
DEREGULATION: A WATERSHED EVENT
In 1978, Congress passed a law allowing airlines to set their own fares and
routes, an event that transformed the industry and the passenger experience.
 "I really don't know
one plane from the
-Alfred Kahn, airline
other. To me they are
economist all just marginal costs
with wings."
 MUHAMMAD SAAD ASIF - 11058

Impact on Airline
Deregulation Act of
1978
 07 The Hub & Spoke System
A "hub" is a central airport with flights paths
radiating from it like spokes on a bicycle
wheel. In a hub-and-spoke airline system, most
flights connect through a few hub airports.
How might a backup at one hub affect travelers
all over the country?

Deregulation lifted restrictions on where

airlines could fly. To increase their efficiency,
airlines adopted the hub-and-spoke system-
using a few major airports as central
connecting points.
 08 Price

Base ticket prices have declined

steadily since deregulation. The
inflation-adjusted 1982 constant
dollar yield for airlines has fallen
from 12.3 cents in 1978 to 7.9
cents in 1997. and the inflation
adjusted real price of flying fell
44.9% from 1978 to 2011.
 09
The quality of airline service
can be measured in many
different ways, including the SERVICE
number of aircraft departures, QUALITY
the total number of miles flown,
seating comfort, punctuality of
service, other programs and
services, and various frills or
amenities.
10

Competition between carriers

Competing carriers at Tokyo Nari ta Airport, Japan

A major goal of airline deregulation was to increase competition between airline

carriers, leading to price decreases. As a result of deregulation, barriers to entry into
the airlines industry for a potential new airline decreased significantly, resulting in
many new airlines entering the market, thus increasing competition.
 11 Effects on airline staff

Deregulation resulted in the shift of

approximately 5,000 to 7,000 airline
mechanic jobs from the major trunk
airlines to smaller carriers between
1978 and 1984. Because such smaller
carriers typically pay less than the
major airlines, the average hourly wage
of airline mechanics decreased by up to
5 percent; however, this decrease is said
to be relatively small.
 12 OPEN SKIES

The US has Open Skies agreements with more than 60

countries, including fifteen of the 28 EU nations. Open
Skies agreements have been successful at removing many of
the government-implemented barriers to competition and
allowing airlines to have foreign partners access to
international routes to and from their home countries
Conclusion
• Deregulation was
successfully in lowering
prices and barriers to entry
& Exit.

• The airline has nonetheless

suffer financially
THANK YOU!