The 1978 Airline Deregulation Act deeply affected the air transportation industry. Fares established by the Civil Aeronautics Board (CAB) based on a uniform rate-of-return regulation prior to deregulation became subject only to market forces. Firms facing bankruptcy were no longer automatically rescued with inflows of federal money. Certificates of convenience and necessity previously required to open new routes were no longer needed. Finally, airlines dissatisfied with some of their less traveled routes could now choose to end service on those routes. These developments led to intense price competition, the entry of numerous new low-cost firms, the development of hub and spokes networks, and the beginning of what some predicted would be a perfectly contestable market. The Airline Deregulation Act spawned the hub and spoke method of passenger delivery as well increasing the level of competition amongst firms causing a decrease in passenger airfares and an increase in carriers'!

Legislatively mandated to promote the air transport system, the Civil Aeronautics Board believed that passengers traveling shorter distances--more typical of travel from small- and medium-sized co

Despite the general trend toward lower fares, however, fares at small- and medium-sized community airports have remained consistently higher than fares at airports serving large communities, largely because of the economics associated with traffic volume and trip distance. As the volume of traffic and average length of haul increase, the average cost per passenger mile decreases, allowing for lower fares. Airports serving small- and medium-sized communities tend to have fewer heavily traveled routes and shorter average distances, resulting in higher fares per passenger mile compared with those of large-community airports.

Cremieux, Pierre-Yves. "The effect of deregulation on employee earnings: pilots, flight

By regulating the airline industry, the CAB was able to employ an artificial price support. They regulated fares so that there was not competition amongst the carriers. Once regulatory controls were dropped, the airline industry was able to lower the price of tickets and still make a profit. As the price per ticket dropped, the income effect caused supply to increase. The income effect states that consumers will purchase more goods and services as their income increases. A decrease in the cost per ticket has the effect of increasing the real income. As supply shifts to the right as a result of better technology, in the form of bigger and faster planes, and lower ticket prices, demand will increase too as stated by the income effect. The CAB has transformed the airline industry by lifting regulations of uniform prices. This was in effect a monopoly for the individual firms. Consumers had only one option, to buy tickets from a firm regulated by the same board as every other airl!

Walker, Karen. "Bespoke fortunes." Airline Business, Jan 1997 v13 n1 pp 32-5.

Given that the majors have closed down their smaller hub operations and become entrenched in a few major hubs, most of them are now relying heavily on these so-called fortress hubs for their future prosperity. But the General Accounting Office is recommending regulatory action to curb hub power, in a report, which brands the hub-and-spoke system as anti-competitive, saying that it is one of the main barriers to competition in several key domestic markets. Moreover, the congressional watchdog points out that at major airports where one carrier accounts for more than 75 per cent of embarkations, fares tend to be higher. In a study of the 43 airports falling under the Federal Aviation Administration's 'large hub' classification, the GAO found fares to be generally 'much higher' in 1995 at the ten airports which are either affected by operational constraints or where one airline accounts for the vast majority of emplanements.

Measuring the overall changes in air service quality since deregulation is more difficult than measuring the changes in quantity. Such an assessment requires, among other things, a subjective weighting of the relative importance of several variables that are generally considered dimensions of quality. Such variables include the number of departures and available seats, destinations served by nonstop flights, destinations served by one-stop flights and the efficiency of the connecting service, and jet departures compared with the number of turboprop departures.

Goetz, Andrew R. and Christopher J. Sutton. "The geography of deregulation in the U.S.

Winston, Clifford. "Economic Deregulation: Days of Reckoning for Macroeconomists." Journal

However, an increase of just one or two accidents in a given year can cause a significant fluctuation in accident rates. It is true that turboprops do not have as good a safety record as the larger jets they replaced in many markets serving small- and medium-sized communities. This fluctuation in accident rates makes it difficult to discern any impact of the increasing use of turboprops on relative safety between airport size.

The overall trend toward lower fares since deregulation is largely due

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