Despite the ever-increasing number of Americans who travel on airplanes for business and for pleasure, the airline industry has historically been, and remains, one of the most financially unstable businesses in the United States. Although air carriers in the United States are owned by private entities or corporations, the economic success of the airline industry has always been of significant interest to the federal government (Dooley & Thoms, 1990). Dooley and Thoms (1990) noted that the United States has always deemed “certain industries…so fundamental to the existence of a sound national economy that the federal government [will] intervene to regulate competition, restore order, and diminish… uncertainty” (p. 8). Since at least the Great Depression, the nation’s transportation infrastructure and operators have been one of those industries considered vital to the national economy. If competition, order, and uncertainty are not mitigated through regulation, the government reasons, the public will lose confidence in the transportation system, and the national economy will be impacted negatively.

One of the most significant regulatory oversights that the federal government instituted with respect to the airline industry was implemented in 1934, when provisions were made for the establishment of the Federal Aviation Commission (predecessor to what is now known as the Federal Aviation Administration, or FAA) (Dooley & Thoms, 1990; Loeb, Talley, & Zlatoper, 1994). Among its other functions, the FAC was charged with ensuring that a critical element of the aviation transportation infrastructure—safety—was standardized through federal policy. Although the modern-day FAA, along with the National Transportation Safety Board, retains responsibility for some important safety oversights, the deregulation of the aviation industry in 1978 impacted safety policies significantly. The nature of these changes will be explored and discussed in this paper.

Before one can understand the impact of the deregulation of the airline industry, however, it is important to understand the history of this industry’s regulation and its relationship with safety. Federal regulation of any industry has multiple motives, and the policies implemented as the result of regulation will reflect most of those motives (Burton, Zick, & Mayer, 1993). In the case of the transportation industry in general and the airline industry in particular, regulatory efforts were intended to perform at least two broad functions: first, to ensure economic stability of the industry by crafting policies that would establish parameters for appropriate competition, and second, to provide both operators and passengers with the confident assurance of safety by implementing policies that would set forth “certain minimum standards of equipment, operating methods, and personnel qualifications” (Dooley & Thoms, 1990, p. 8). At times, these two functions conflicted with one another as multiple stakeholders attempted to exert their influence over the policy-making and implementation processes (Burton et al., 1993).

The obvious stakeholders included airline owners, operators and employees, and passengers, but there were a number of less obvious stakeholders as well (Burton et al., 1993). Airlines are highly dependent upon a number of partners and service providers whose economic interests are also at stake and would be affected by any policy and practice changes. These partners include food and service providers, such as maintenance, baggage handling, and cleaning staff, and, increasingly, retail partners that have advertising or service agreements that bring their goods and services to the direct and captive attention of passengers (Doganis, 2001). Such retail partners include credit card companies, entertainment providers including DirectTV, phone and other telecommunication companies, and duty-free purveyors of perfume, liquor, and jewelry, among others (Doganis, 2001). Finally, still another stakeholder group influencing industry regulation policies and practices is lobbying groups, which represent a variety of public and private interests and which often wield their influence by either promising or withdrawing financial support (Knoke, 2001).

Each stakeholder group has a different sphere of influence with respect to bringing regulatory / deregulatory concerns to the policy agenda. As Burton et al. (1993) observed, “the public [plays a] limited role in putting airline deregulation on the policy agenda” and policy makers, influenced mainly by safety, legal, and economic experts, “have…typically failed to factor in public opinion” (p. 1). In the matter of airline regulatory policy, then, the public that supports the airline and ensures its commercial continuity has minimal input about the type and scope of policies applied to that industry (Burton et al., 1993). Instead, moneyed interests and the legislators who are influenced by them have the greatest opportunity for input during policy discussion processes, as well as in shaping actual outcomes, the interpretation of policy, and in its implementation.

Safety was a significant component of the airline regulatory processes that began in the 1930s. The FAC was intended to serve as a policy-making, regulatory, and enforcement body that would, above all, be responsible for the safety of the airline industry (Ettedgui, Henning, Lebow, Sarsfield, & Stanley, 2000). In addition to determining the standard minimum requirements for flight and ground crews, the FAC would establish standard operating procedures for air traffic control and in-flight and on-ground safety procedures, as well as identify standard procedures that would be put into effect in the event of aviation incidents or accidents. Incidents are defined by the FAA as events that occur outside of normal operations that could potentially compromise the safety of both crew and passengers, while accidents are actual events, such as crashes, that actually compromise the safety of crew and passengers, resulting in injury and/or death (Haunschild & Ni Sullivan, 2002). Safety, then, is defined as the absence of both incidents and accidents; however, as Loeb et al. (1994) acknowledged, defining, reporting, and tracking incidents is far more complicated than documenting accidents, and under-reporting of incidents may give the industry and the general public a false impression of the actual safety of the industry. The FAA maintains an archive of both incidents and accidents; this archive is a valuable source of information over a longitudinal period, allowing comparison about the potential correlation between deregulation and airline safety in the United States.

Discussion of Effect of Deregulation of the Airline Industry

Now that the history of the regulation of the airline industry has been explained, it is possible to move on to a discussion of the deregulation of the industry. By the mid-1970s, airline owners and powerful lobby groups were advocating that the federal government withdraw from playing an active role in both determining and managing airline policies (Moses & Savage, 1989). Although the safety regulations set forth by the government were not onerous for airlines, the other part of the package deal of regulation—namely, control of competition and economic policies governing the industry—were viewed by airline operators as restricting the growth of the industry (Moses & Savage, 1989). Legislators were persuaded that regulation was actually inhibiting the industry’s optimal performance. By this time, significant improvements in technology, both in the mechanical and structural components of aircraft and in navigational and communication procedures, had permitted air carriers to expand their operational and carrying capacities (Loeb et al., 1994). At the same time, the frequencies and distances flown by major carriers in particular were poised for expansion into regions where service had not existed previously (Loeb et al., 1994). The only factor that was preventing the full realization of such potential was the policies that artificially controlled competition (Loeb et al., 1994).

The argument for deregulation of the airline industry, then, was that the entry of new carriers and specialty carriers, especially low-cost airlines specializing in region-specific service (in the style now provided by Southwest, Air Tran, and Jet Blue), would “provide airlines with greater freedom for entry and pricing, thereby increasing the influence of market forces on air service” (Loeb et al., 1994, p. 130). Despite the fact that passengers had little or no influence in shaping legislators’ impressions and final decisions with respect to deregulation policies, the arguments propounded by deregulation advocates did highlight passenger interests and purported advantages. It was argued that deregulation would facilitate efficient operation and the ability to “move more passengers at a greater distance, with more full planes and fewer staff” (Loeb et al., 1994, p. 130). The arguments were convincing and in 1978, Congress passed the Airline Deregulation Act, undoing almost 45 years of policy that governed the industry (Loeb et al., 1994).

The Airline Deregulation Act did not represent the government’s complete withdrawal from engagement in the airline industry (Dooley & Thoms, 1990). In fact, the federal government did remain actively involved in establishing some new policies that would govern the industry (Dooley & Thoms, 1990). The government retained its right and responsibility to oversee agreements with international governments and airlines regarding international air transportation (Dooley & Thoms, 1990). The government also stipulated ownership rules for domestic airlines; only U.S. citizens or corporations based in the U.S. could own and operate a domestic carrier (Dooley & Thoms, 1990). With respect to safety, there were some provisions, but they were general and lacking in clear enforcement strategies and consequences that would be meted out to carriers in violation of pilot certification and licensing and aircraft worthiness (Dooley & Thoms, 1990). Almost all other aspects of the industry were relegated to the airlines themselves in the deregulation act.