The Birth of Regulation – Part One The Birth of the Civil Aeronautics Board – May 15, 2009

Quote of the Week

“Within all of us is a varying amount of space lint and star dust, the residue from our creation. Most are too busy to notice it, and it is stronger in some than others. It is strongest in those of us who fly and is responsible for an unconscious, subtle desire to slip into some wings and try for the elusive boundaries of our origin.”—K O Eckland “Footprints On Clouds”

The Birth of the Civil Aeronautics Board

The roller coaster years that preceded the Civil Aviation Act of 1938 should have been viewed as “growing pains” for the newly-founded airlines and handled accordingly. However, by 1935, the federal government had begun a comprehensive economic regulation of the banking, rail, trucking, intercity bus and other industries. This trend reflected a general loss of confidence in free markets during the Great Depression, and the core objective in this new wave of regulation was to restrict or eliminate competition. It is important to understand that this was a complete reversal of the Roosevelt’s Administration position in 1932.

At this time, there was a war in progress in Asia and it was rapidly approaching Europe. Plus, the United States was trying to get its house back in order after The Great Depression. The aviation industry was considered an important link to national defense, and the newly formed Civil Aeronautics Board, established by Congress through the Civil Aeronautics Act of 1938, was expected to ensure their survival and prepare the newly formed airlines for the vital roles they would be expected to play in the coming years. All modes of transportation were just as vital as the airlines but it was the airlines, and the associated growth in aviation technology, followed by rail, trucking and all others that allowed our country to be successful on the road to recovery and beyond.

The newly created CAB, an agency that now controlled all of the domestic markets, was also responsible for establishing the quantity of service and pricing of that service. It did so by deciding where each airline could fly, how many flights should be taken, and how many seats they could offer. They were also responsible for setting minimum and maximum fares. Once airlines acquired authority to operate between two cities, they were obligated to operate a minimum number of flights but needed CAB approval to abandon the route if it proved unprofitable.

The CAB rarely approved an airline to do so, because they felt that if an airline was receiving a reasonable rate of return on profitable route, then this would subsidize service on the marginal/unprofitable routes. Essentially, the CAB controlled the profits and whenever an airline got into financial trouble, the CAB would simply arrange a merger with a healthier airline.

Next week we will finish up this two part series on the CAB. Until then, take some time to look back, connect with your past and remember as an aviator you are a “Gatekeeper of the Third Dimension”.

Protect your profession, your future and the future of your fellow aviators.

Robert Novell

May 15, 2009