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Airline De-Regulation

Summary:
The American airline industry was de-regulated in 1978 under President Carter, not Reagan. This forced airlines to change. From this time on, they had to meet customer demand. They were no longer protected by federal law against low-cost fares. The corporate culture of the airlines could not adjust. There was an exception: Southwest Airlines. It had its origin inside Texas, outside of federal price regulations in its early days. Its routes never crossed state lines, so it was not under the Civil Aeronautics Board’s rate price floors. When deregulation came in 1978, Southwest’s competitors went bankrupt, one by one. They had been designed in terms of federal regulation. They could not compete in the new price competitive environment. Southwest could. POSTER

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The American airline industry was de-regulated in 1978 under President Carter, not Reagan.

This forced airlines to change. From this time on, they had to meet customer demand. They were no longer protected by federal law against low-cost fares. The corporate culture of the airlines could not adjust.

There was an exception: Southwest Airlines. It had its origin inside Texas, outside of federal price regulations in its early days. Its routes never crossed state lines, so it was not under the Civil Aeronautics Board’s rate price floors. When deregulation came in 1978, Southwest’s competitors went bankrupt, one by one. They had been designed in terms of federal regulation. They could not compete in the new price competitive environment. Southwest could.

POSTER CHILD OF REGULATION: UNITED AIRLINES

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In 1970, United Airlines’ slogan was “Fly the Friendly Skies.” It was meaningless. Robert Poole wrote a classic essay that year for Reason on the need for the de-regulation of the airline industry. The title: “Fly the Frenzied Skies.” Read it here.

In 1979, I wrote an article on free market competition. I also selected another United Airlines’ pre-deregulation slogan: “You’re the Boss.” When United adopted that slogan, customers were not the bosses. Federal bureaucrats were. In 1979, that was no longer the case.

United never made the adjustment. UAL declared bankruptcy in 2002.

The company has received continuous coverage for this video. A passenger is being removed from the plane. He refused to comply when told to leave.

There were multiple videos recorded and posted. One or another video was picked up by newspapers and TV shows around the world. For examples, click here.

This led within hours to this spoof ad:

Airline De-Regulation
United Airlines’ official position, according to statements filed with the federal government, is that its seats are guaranteed.

It turns out that the now-notorious flight was not overbooked, as UAL had originally announced. The airline wanted to offer transportation to a flight crew for an associated regional airline. This saved UAL a four-hour rental car drive.

This lawyer says UAL broke the law.

Naturally, senior management apologized. This was after the videos started going viral. Too late.

Gary North

Gary Kilgore North (born February 1942) is an American Christian Reconstructionist theorist and economic historian. North has authored or coauthored over fifty books on topics including Christian theology, economics, and history. He is an Associated Scholar of the Ludwig von Mises Institute.

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