Airline De-Regulation? What, Exactly, Does That Mean?

People speak of the airline industry being de-regulated some time ago (like 25 years ago or somewhere).

Can someone give me a bare-bones description of what this means, why it was done, etc.?


For one thing, the government used to regulate rates, so airlines like Jet Blue and Southwest could not have existed before deregulation. They would not have been allowed to offer passenger service at such low fares.

Before deregulation there was an intra-California airline known as Pacific Southwest, and the story was that they could charge lower fares because they didn’t cross state lines, and were exempt from the fare regulations described above. Come to think of it, it was in the early 80s that they went out of business, probably because then the major carriers could underbid them and squeeze them out.

To expand a bit on Spectre’s answer;

What the government was regulating, and stopped regulating, was the commercial aspect of interstate air travel. You could not start up an airline by buying a bunch of planes and hiring staff, renting hangars and offering seats for sale; you were required to get government approval to run an airline, and the government would determine what routes and territories you were allowed to cover. In other words, the government essentially determined everything about air travel; what the fares would be, what routes the airlines could fly, what their schedules would be, everything. If you wanted to compete with United’s New York-Miami service, well, you just weren’t allowed to, because the government would not permit you to do so, even if you could offer better service at a lower price. The body that did all this was the Civil Aeronautics Board.

This was reversed in 1978 by the Airline Deregulation Act. Airlines were now allowed to determine where and when their planes would fly and how much they would charge. Contrary to popular belief, the government did NOT deregulate things like safety regulations.

Generally speaking the result has been positive:

PRICE - Prices, adjusted for inflation, are lower than they were in 1978.
SERVICE AVAILABILITY - There are more flights now than there were then, dramatically so in smaller cities and towns.
SAFETY - Airline safety is much better now, though there’s little evidence that’s connected to commercial deregulation.
SERVICE - Somewhat harder to determine. More people are flying to more places, which causes more airport congestion and delays; however, it’s hard to say that’s a bad sign, since it’s a result of MORE people flying.