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History of airline deregulation in the global market
History of airline deregulation in the global market
The history of airline industry
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Shortly after World War I, the U.S. Government discovered the abilities of the modern airplane and created the idea of utilizing aircraft to transport mail across the country. In 1917, Congress approved funding to experiment with the idea of delivering mail by air. By 1920, the Post Office was delivering mail across the entire country, eliminating over 22 hours in delivery times of a coast-to-coast route. With the success of the airmail service and the growing popularity of civil aviation, the U.S. Government recognized the need to develop set standards for civil aviation and in 1926 created the Air Commerce Act of 1926. The Air Commerce Act of 1926 called for the government to regulate air routes, navigation systems, pilot and aircraft licensing and investigation of accidents. The act also controlled how airlines were compensated for mail delivery. Later in 1930, Postmaster General Walter Brown made recommendations which were later known as the Watres Act which consolidated airmail routes and opened the door for longer-term contracts with the airlines. Brown handled the situation regarding new contracts poorly by only inviting a hand selected list of large airlines to the negotiation table. This move pushed smaller airlines to complain and the issue was pushed to Congress. Following congressional hearings President Roosevelt later decided Brown’s scandal was too much to deal with and canceled all mail contracts completely and handed over air mail delivery responsibility to the U.S. Army. That decision was a disaster, and one month later, air mail was handed back over to the private sector. This time, however contract bidding was more structured and fair to all. It was then clear that the airline industry was back in full swing...
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...ll regulates several areas of aviation, such as flight crew and aircraft certification, maintenance, as well as the national airspace system. Slot management is also something that is regulated by a third-party group. In our capitalistic society, it is clear however that routes and fares are both items that are best driven by the market.
Works Cited
Avjobs.com - The History of Aviation. Retrieved 12/1 from http://www.avjobs.com/history/index.asp
Businessweek.com – Airline Deregulation, Revisited. Retrieved 12/1 from http://www.businessweek.com/bwdaily/dnflash/content/jan2011/db20110120_138711.htm
U.S. Centennial Flight Commission. Retrieved 12/1 from
http://www.centennialofflight.gov/essay/Commercial_Aviation/Dereg/Tran8.htm
Bureau of Transportation Statistics. Retrieved 12/1 from
http://www.bts.gov/press_releases/2010/bts031_10/html/bts031_10.html
The objective of this research report is to provide a thorough analysis of Alaska Airlines. In order to do this we chose to compare a similar company against them. The company in comparison is Spirit Airlines. Both companies compete in the same type of business through airline transportation. Many of their services include; security, safety, transportation of passengers as well as luggage, ensuring vehicle safety while in transit, concierge services, providing entertainment aboard plane, checking weather conditions prior to flight, and much more. All of the data gathered for this report was obtained from the company’s 10-k filings with the SEC.
In the Travel Pulse article "Airlines Leaving Us Little Choice – Like A Monopoly," posted by Rich Thomaselli, the practice of monopolization is observed in the airline industry. The author criticizes large airlines on their growth that has led to at “93 of the top 100 [airports], one or two airlines controlling a majority of the seats” (Thomaselli). The scornful article was written after recent events that have caused the Department of Justice and five States to sue two of the biggest U.S.
On 9 February President Roosevelt ended all government air mail contracts with airlines and ordered the Army to fly the mails. Roosevelt took this measure to deprive commercial airlines of scandalously high financial arrangements, but his plans failed because of the Army Air Corps' inability to handle the job. After the ...
The pros of an airline implementing a policy that bigger customers need to buy a second seat is that the weight capacity regulations will be followed to. As well as the cons of an airline implementing a policy that larger customers need to buy a second seat would result in a bigger people who travelling will not uses that airlines anymore, airlines would be glowered on by family or relatives of larger customers, airline’s policies could be vigorously monitored for discriminatory actions against overweight persons. As mentioned in the book there are no federal laws prohibiting discrimination against obese individual, although there are some places such as Wisconsin, DC, and California provide legal protection. (Harvey & Allard , 2012, p. 234)
Growth of commercial aviation was greatly influenced when the U.S. Air Mail Service was created in the early 1920’s. The Post Office was one of the first to impose aviation regulations. It required its pilots to be tested, pass medical exams and have at least 500 hours of flying experience. The Post Office set up aircraft inspection schedules and preventive maintenance programs for the pilots to have a safe airplane to fly. These early regulatory requirements improved air carrier safety.
of price versus service in the airline industry as a whole, as well as, the
...ay to the rise of big business. Americas population was increasing, many citizens were employed and making money, and more eager to spend. Some of the businesses got too big and antitrust acts, such as the Sherman anti-trust act, were passed to control the powers of monopolies and their owners. Not only were there monopolistic companies in the corporate world, there were monopolies in the railroad business as well. The control of railroads became an issue in politics over the abuses and operations of the rail systems. Soon, the federal agencies Interstate Commerce Commission was formed as the first regulatory agency to control private businesses in the public?s interest. More and more control was placed upon Americas businesses and corporations and from this grew unions, as well as conflicts between management and labor, all of which exist today.
Topic A (oligopoly) - "The ' An oligopoly is defined as "a market structure in which only a few sellers offer similar or identical products" (Gans, King and Mankiw 1999, pp.-334). Since there are only a few sellers, the actions of any one firm in an oligopolistic market can have a large impact on the profits of all the other firms. Due to this, all the firms in an oligopolistic market are interdependent on one another. This relationship between the few sellers is what differentiates oligopolies from perfect competition and monopolies.
In 1978, deregulation removed government control over fares and domestic routes. A slew of new entrants entered the market, but within 10 years, all but one airline (America West), had failed and ceased to exist. With long-term growth estimates of 4 percent for air travel, it's attractive for new firms to service the demand. It was as simple as having enough capital to lease a plane and passengers willing to pay for a seat on the plane. In recent news, the story about an 18-yr British...
...lroads gave special rates to some shippers in exchange that the shippers continued doing business with the railroad company. In the Clayton Antitrust Act, it said no one in commerce could regulate rates in price between different buyers (Document E). It said that otherwise, this would create a monopoly in any line of commerce. However, the Elkins Act of 1903 pushed heavy fines on the companies that did that. The Hepburn Act of 1906 also cracked down on depravity of the railroad companies. The Underwood tariff bill lowered rates on imports. Also a significant change was the graduated income tax. The Federal Reserve Act created the Federal Reserve Board which was enabled to issue paper money backed by commercial paper. This increased the rate of money flow throughout the country allowing many businesses to survive critical financial crises.
The results of airline deregulation speak for themselves. Since the government got out of the airline business, not only has there been a drop in prices and an increase in routes, there has also been a remarkable increase in airline service and safety. Airline deregulation should be seen as the crowning jewel of a federal de-regulatory emphasis. Prices are down: Airline ticket prices have fallen 40% since 1978. Flights are up: The number of annual departures is up from 5 million in 1978 to 8.2 million in 1997. Flights are safer: Before deregulation, there was one fatal accident per 830,000 flights, now the rate is one per 1.4 million flights. So what's the problem?
With the creation of this new branch of the federal government came many new rules and regulations regarding every aspect of the aviation industry. One of the first acts this branch passed was an act to establish the first air traffic control centers in the United States. These centers were intended to give air traffic control while planes are in the air going to their destination. In these centers people monitored the planes positions, and used telephones to talk with the pilots, and other important airport officials. Even though most of the aviation safety was the federal government's responsibility, around the 1930's state governments operated airport towers and the federal government continued to improve safety. Also during this time many airplane crashes caused the government to question if the department was doing a...
Before we discuss government intervention and its affect on an industry’s competition we must first seek to understand the five forces framework. The theory, discussed in 1979 by Micheal Porter seeks to evaluate the attractiveness of an industry. Throughout this essay I will explore the theory and then relate government action and its well-documented affects on the airline industry.
The perennial crisis in the airline industry: Deregulation and innovation. Order No. 3351230, Claremont Graduate University). ProQuest Dissertations and Theses,, 662-n/a. Retrieved from http://search.proquest.com/docview/304861508?accountid=8364.
Market segmentation means dividing the market into distinct groups that have common needs and will respond similarly to marketing action. Each segment must be unique, have common needs, and respond in a similar manner to marketing efforts. Target market is the group of potential customer that has been selected by business to focus its marketing efforts towards. This is the group the business wants to sell its products/services to. Positioning refers to the image created in the minds of customer of its product or brand. It is a perception created in the minds of the consumer relative to that of its competitors.