The Deregulation Act of 1978 – Part One – July 03,2009

Today I am starting a new series on Airline Deregulation. A lot has been said on the subject, but maybe I can give you a simpler explanation on what really happened or as Paul Harvey would say—“Stay Tuned for the Rest of the Story”. As always, I would like all aviators to connect with their roots and one of the ways they can do that is by using the “Third Dimension Blog” as a resource.

Quote of the Week

“One could sit still and look at life from the air; that was it. And I was conscious again of the fundamental magic of flying, a miracle that has nothing to do with any of its practical purposes – speed, accessibility, and convenience – and will not change as they change. Looking down from the air that morning, I felt that stillness rested like a light over the earth. What motion there was took on a slow grace, like slow-motion pictures which catch the moment of outstretched beauty that one cannot see in life itself, so swiftly does it move. And if flying, like a glass-bottomed bucket, can give you that vision, that seeing eye which peers down to the still world below the choppy waves – it will always remain magic.” Anne Morrow Lindbergh—“North to the Orient” 1935

Airline Deregulation

Why was deregulation necessary after 52 years of control by the U.S. Government? Did they have an attack of conscious? I don’t think so. It was all about the regional airlines like Texas International, Southwest, Air Cal, and others who were not being regulated by the CAB, and as a consequence they offered competitive fares and frequency. The Trunk Carriers were not allowed to do this. So, some in Congress started asking why and before long someone started waving the banner for deregulation. That someone was Senator Ted Kennedy.

Deregulation actually came to the forefront during President Gerald Ford’s stay in the White House, but it was President Jimmy Carter who made it all happen during his administration. President Carter gave the chairman’s chair at the CAB to a believer in deregulation—Mr. Alfred Kahn.

Before I move forward, let’s go back to Senator Ted Kennedy. Senator Kennedy was convinced that government regulation did not serve a purpose and was counterproductive to the health of the airlines and the flying public. Granted, almost everyone could see that, but the Senator started this process in 1974 and 1975, and I find it curious that after sitting in the Senate since 1962 why it took him — and others — twelve years to figure this out. The intra-state carriers had been around since the mid sixties and the CAB had been micromanaging airline affairs since 1938. Senator Kennedy joined hands with Stephen Breyer, a Harvard academic, to investigate inefficiencies of existing regulations, and the Kennedy hearings focused on the inefficiencies that resulted from regulation by comparing the experience of the regulated airlines with that of the unregulated intra-state carriers.

Of course, their conclusions were obvious to most in the industry but it is important to understand that the dismantling of the trunk carriers began here. So, Senator Kennedy started it by pointing out all of the inefficiencies that his current and former colleges had put in to the system and Mr. Kahn finished it.

Senator Kennedy was a hero and a champion of the people, but I think someone forgot to consider the twenty carriers that fell from the ranks, and all of the professionals who worked for those carriers who lost their jobs, their retirement and pension funds, and their future working in an industry, that they had made the best in the world.

Now back to Mr. Kahn, who is now known as the “Father of Deregulation “, an economist who also served as an adviser to President Carter as well as the Inflation Czar. Now I don’t want to show my bias towards Carter, I am a diehard Libertarian, but history does not treat him or his policies kindly. However, somehow historians have overlooked the failure of deregulation. Mr. Kahn was a staunch supporter of deregulation, and he did his job well. The experts will tell you that fares came down 30% in the years following deregulation, and you have more options, and better service. But what about the chaos they created and then ignored? An interesting footnote here is that all of the trunk airlines and their unions opposed deregulation except United. Why? Also, I found it interesting that Ralph Nader also opposed deregulation—imagine that.

Next week we continue the series on the Deregulation Act of 1978—bureaucracy at its best. So, 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

July 3, 2009