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What is Airline Deregulation?

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  • Written By: Jessica Ellis
  • Edited By: Bronwyn Harris
  • Last Modified Date: 25 August 2016
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Airline deregulation refers to government ceding control over certain aspects of the air industry to the airline corporations. The United States was one of the first countries to officially deregulate airlines through the Airline Deregulation Act of 1978. The European Union as well as many other governments have followed suit, leading to an increase of free market business strategies throughout the industry of the skies.

Early use of airplane technology was geared toward goods transportation and weaponry rather than passenger transportation. In the United States in particular, planes were first widely used as mail-carrying transportation units, rather than for commercial flights. As the mail service is a federal industry, it originally made some sense to keep planes under federal regulation. With the arrival of jet planes in the mid-20th century, the focus of major airline corporations shifted to passenger flights, leading to serious stress on the governmental agencies meant to oversee the industry.

Airline deregulation under the 1978 Act allowed commercial carriers to determine their own fares, destinations, and routes. In most countries that have implemented some form of airline deregulation, the result has been a significant drop in passenger fares as the airlines must now compete for business. Under many regulatory laws, airlines were awarded specific routes and had to follow government pricing guides. Deregulation allows airlines to specialize and customize their business model and services to create a free market system.

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In the European Union, airline deregulation officially began in the late 1990s. The process of deregulating the airlines has met with some complications in European countries, as many featured government-managed airlines, such as Air France, that received taxpayer subsidies and were seen as the official airline of the country. Many of these “flag carrying” airlines have folded since deregulatory policies became standard, as they charge significantly higher fees and fail to make international partnerships that open up new markets around the world.

One of the most important results of airline deregulation is the creation of budget airlines. These start-up companies slash typical customer service offerings, such as free meals and passenger lounges, in order to offer cheaper fares. By utilizing smaller airports, tightening operating budgets, and cutting back on extra services, budget airlines have seen resounding success throughout the world.

A great concern with airline deregulation, particularly in the wake of the tremendously popular budget airlines, is the mistreatment of passengers. Nightmare stories of passengers trapped in planes on runways for several hours or even overnight lead many to believe that some government regulation is required to protect passenger rights onboard flights. Since government interest often extends only so far as to enforce airplane safety, passengers are usually left with no legal recourse to sue an airline for mistreatment. As of the 21st century, passenger bill-of-rights have become a hot topic in regards to the industry.

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