This research examines the regulation of the airline industry in the United States, which was initiated in the late 1920s and which was substantially strengthened in the late 1930s, and the deregulation of the industry, which was initiated some 40 years later, in the late 1970s, and which continued into the early 1980s. Both the political and economic factors associated with each of the policy changes are reviewed, as a means of assessing the motivations underlying the changes.
The positive military experiences with aviation in the First World War carried over into the postwar period in the form of an ever increasing interest in general aviation. There was also a strong interest in the potential for the commercial development of aviation. In the early 1920s, however, aviation development occurred primarily in the forms of stunts and demonstrations. Stunts occurred in the form of long distance (by the standards of the day) flights, speed (again, by the standards of the day) trials, and aerobatics, as a means of exhibiting the capabilities of aviation. Demonstrations occurred in the form of barnstorming flights by celebrities between major cities, and in the form of providing opportunities for individuals in almost every small town in the country to experience a short flight for a relatively large (one again, by the standards of the day) fee. These demonstrations provided aircraft owners with an opportunity to
earn some money, as well as serving the more important purpose of selling the general public on air transportation.
In the mid 1920s, the federal government in the United States awarded the first contracts for the transportation of mail by air (Moskowitz, Katz, and Levering, 1986). Congress enacted the Kelly Air Mail Act in 1925, and the first airmail contracts were let in 1926 (Moskowitz, Katz, and Levering, 1986). Although these airmail contracts were, in some instances, awarded to individuals as well as t...