Many major airlines in the United States witnessed their downfall by the time the 1980s finished. Following years of dominance, these carriers were on their last legs by the end of this decade. We take a look at what happened, and why the 80s brought about a cull of these once so powerful airlines.
The mid 20th century is often dubbed the ‘golden age’ of airline travel. Lavish cabins with gourmet meals, friendly stewardesses and open leg space were the norm. However, many of the airlines associated with this progress were no longer trading the time the 1990s were in full swing.
Braniff International Airways, Capitol Air, Frontier Airlines and Pacific South West Airlines all ceased trading in the 1980s. Along with this, Pan American and Eastern Air Lines also went on a downward spiral with multiple revival attempts during this decade. These iconic airlines eventually went bankrupt in 1991.
Some of these airlines were snapped up by other companies or made a comeback in following decades. However, with a commanding presence within the glory days of commercial aviation, why did these firms struggle in the 1980s?
The Airline Deregulation Act was introduced by president Jimmy Carter in 1978. This is a law that removed federal government control over many critical aspects of the aviation industry. Before this, the Civil Aeronautics Board regulated domestic interstate routes. The board set most of the routes, schedules and even fares. The deregulation act gave more freedom to airlines to control their business. Additionally, it made it easier for entry level firms to break into the industry.
Now, for the first time, there was a free market in the commercial airline industry. Low cost-carriers soon began to grow with this newly found freedom. The US population, therefore, gained cheaper flights, with far more to choose from. This ultimately caused the number of passengers across airlines to rise.
Flying was previously a luxury service, mostly only afforded to the rich. As the ’80s came by, the general public could now have the honor as well. However, the increase of flights purchased across airline companies meant that the previous market dominators reduced their share.
Prior to 1978, there were ten large airline companies that controlled 90 percent of the market. Eight smaller, regional firms operated the bulk of the rest. The market changes pressured these companies to reduce their costs. Generally, the inflation-adjusted 1982 constant dollar yield for airlines fell from 12.3 cents in 1978 to 7.9 cents in 1997.
To compete with these prices, the major players had to review their costs of business. Conflicts with labor unions arose as a result of many airlines’ austerity since deregulation.
It wasn’t just new players that benefited from the revision. Certain major performers gained the ability to expand with ease, with the Civil Aeronautics Board no longer holding them down. For example, American Airlines previously flew to only 39 cities.
Along with this, Continental Airlines had to wait eight years for permission to serve San Diego to Denver. The swift allowance of new routes for airlines in the ’80s shook up the traditional order that benefited certain carriers.
Despite nostalgic grievances related to the loss of aviation icons, the general public initially benefited from deregulation. Economist, Alfred Kahn stated that combined, travelers have saved $5 billion to $10 billion per year since deregulation.
The aviation market received a shakeup during a time when American industries were all receiving overhauls. Legislation in land transport, utilities, stocks, entertainment, communications and natural resources all saw changes during this time.
These monumental shifts caused job losses for certain individuals working within these industries. Those working for the likes of Pan Am, Capitol and Braniff were ultimately the ones that suffered due to deregulation. Many of these workers had their salary structure revised before losing their job due to company bankruptcy.
Today, the public is starting to see the drawbacks of deregulation. With many airlines falling since 1978, there has been major consolidation in the US. Now, only four airlines control 80% of the market. Those airlines have the freedom to set financial policies at the expense of the customer. Increased baggage fares, amendment fees and strict refund policies have risen as a result.
Despite its positive intentions, the Airline Deregulation Act of 1978 ultimately led to many tough situations. The general customer may have benefited from more effective flights but this came at the expense of many major airlines.