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US Air Transportation Industry’s Regulation Report (Assessment)


According to Wensveen (2012), air transport industry refers to the aviation sector. It involves all the aviation activities, from passenger to cargo transport using airlines, to management of their airlines. The industry also includes all the activities which support the normal operations of the air transport.

Difference between Certified Air Carriers and General Aviation

Ferguson and Nelson (2014) defines general aviation as “All civil aviation operations other than scheduled air services and non-scheduled air transport operations for remuneration or hire” (p. 48). They include a wide range of flights, from the powered parachutes and gliders, to corporate jet flights (Ferguson & Nelson, 2014). According to Ferguson and Nelson (2014), general aviation involves a wide range of activities from the commercial to non-commercial flights clubs, manufacturing and maintenance of airplanes, trainings among other activities. On the other hand, certified air carriers are airline companies that seek to offer specific aviation services including scheduled passenger airline and military flights. To get this certification, a firm will have to get an approval from FAA and authority from Secretary of Transport’s office.

U.S. Airline Deregulation Act

In 1978, the United States government enacted an Act that transformed the regulations in the aviation sector within the country. According to Ferguson and Nelson (2014), this policy eliminated its control over aviation issues such as market entry, routes, and fares charged by commercial airlines. Till then, these factors were defined by the federal CAB (Civil Aeronautical Board). However, the government realized that it was in the interest of the players in this industry to let these factors be defined by the market forces. One of the biggest advantages of this Act was that it eliminated the government interference into this industry. At the time that government controlled these factors, it was easy for the political class to influence these factors, especially during the electioneering period in order to win public sympathy. This was affecting the aviation sector because most of the members of the politicians do not understand the dynamics in this industry. When they are allowed to exercise tight control into this sector, chances that they will develop ineffective policies for the sake of pleasing the public are very high. As Hamlin (2013) notes, such policies may hurt airlines which will be forced to operate under regulations that are not practical in the aviation sector. Allowing the market forces to define these factors was seen as liberation by the players in this industry because it was now possible to set their prices competitively, but at the rates that would ensure sustainability in the market.

Despite the above advantage of the U.S. Airline Act 1978, some people still feel that the decision was not correct. According to Wensveen (2012), the aviation sector is one of the most important transport sectors in the world. However, due to its complexity and the costs associated with owning and managing private jets, an overwhelming majority rely on the commercial planes when planning to make air travels. Handing over power to these airlines so that they can set their desired prices is a very dangerous move. These airlines’ main interest is to maximize on their profits. When the market forces allow them to set fares to various routes, they will tend to increase the fee to their favor. According to Ferguson and Nelson (2014), it is a fact that when there is a perfect competition in the market, the prices will be adjusted automatically to the best rates that are fair to both the companies and customers. However, it does not stop the airlines from increasing their fares for no justifiable reasons. For instance, some airline companies would increase the fare during high seasons. They do this, not because the costs of operations have gone up, but because they know travelers will have no otherwise but to use their services. These unfair trade practices are common when a government withdraws its regulations in a given industry.

Discussion: Deregulation

According to Hamlin (2013), the U.S. Airline Deregulation Act 1978 still remains controversial three decades after its enactment. A section of the society is yet to be convinced that this move was appropriate. The other section believes that this is the best decision that the government ever made for the benefit of the aviation sector. Although there might be some disadvantages to this Act, the benefits outweigh the shortcomings. In this section, the researcher will focus on the quality service delivery that has been created by this Act. When the government decided to let the market forces control this industry, it allowed all the players to have a leveled playing ground in this industry. Barriers to market entry were eliminated and policies that defined how to price the products were also eliminated. The local firms that enjoyed government protection had to fight for themselves in order to be sustainable. As Gold (2013) notes, firms will always avoid price wars even when they are given the liberty to set their own competitive prices. This meant that many firms had to find a way of maintaining a pool of loyal customers. To do this, many airline companies were forced to deliver high quality products to their clients.

References

Ferguson, M. D., & Nelson, S. M. (2014). Aviation safety: A balanced industry approach. New York: Cengage.

Gold, R. (2013). . The Wall Street Journal. Web.

Hamlin, G. (2013). Three-Holer Disappearing Act. Air Transport World. Web.

Wensveen, J. (2012). Air Transportation: A Management Perspective. Burlington: Ashgate Publishing.

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