THE DOMESTIC AIRLINE INDUSTRY: A QUESTION OF REGULATION

In 1938, the Civil Aeronautics Board (CAB) was established to regulate the fare and route structures of the domestic airline industry. At that time, policy‐makers were fearful that free market conditions in the airline industry would not foster the growth which was deemed to be optimal in the public interest. After forty years of industry development, however, the market structure of the airline industry does not provide justification for regulation. Furthermore, the regulation itself has created problems which are undesirable to both the industry and the public. On October 25, 1978, President Carter signed into law a bill that will gradually remove the regulatory restrictions under which interstate domestic airlines have operated since 1938. All regulatory control over the airlines will end by 1982, and the CAB will be abolished in 1985.