Lcc Vs Legacy Carriers
...was highly regulated in terms of how the airlines operated economically. Before the Airline Deregulation Act of 1978 the CAB (Civil Aeronautics Board), now the FAA (Federal Aviation Administration), regulated all domestic air transport as a public utility, setting fares, routes, and schedules. The CAB was the driving force behind the entire airline industry. If an airline wanted to start service or change fares they would have to petition the CAB for that right. In the 1970's things started to change and the whole system was encountering pressure from all sides. The airlines obviously favored the system since they would almost be guaranteed a profit, while passengers despised it because of the ever increasing fares. The energy crisis of 1973 and an economic downturn had started to change the economy; congress was forced to get involved. Congress was scared the airline industry would follow the rail industry into major financial troubles. They were worried a huge bankruptcy could happen and force a tax payer buyout similar to the one Penn Central experienced. Not looking to make the taxpayers foot the bill for another buyout congress began looking at solutions to the problem. So in 1975 the United States Senate Judiciary Committee started to hold formal hearings into airline deregulation. Many issues arose and much time was taken to carefully examine the consequences of both sides of the argument. In the end it was decided that the Airline Deregulation Act or ADA would be signed into law in 1978. "The ADA stated many goals:
the maintenance of safety as the highest priority in air commerce;
placing maximum reliance on competition in providing air transportation services;
the encouragement of air service at major urban areas through secondary or satellite airports;
the avoidance of unreasonable industry concentration which would tend...
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