its greatest effects. Economics had much to do with the beginnings of government regulation of the airline industry as well.
In 1938, the Civil Aeronautics Act created the Civil Aeronautics Board (CAB), and this legislation made the interstate, overseas, and to a degree the international common-carrier airlines of the United States subject to direct economic regulation by the CAB. This was a five-member independent regulatory agency with the authority to do the following:
1) Control entry into the industry and control entry of existing carriers into new or existing routes.
2) Control exit by requiring approval before cessation of service to a point on a route.
3) Regulate fares based on rate-making provisions adopted from the Interstate Commerce Act.
4) Award direct subsidies to air carriers.
5) Control mergers and intercarrier agreements so as to immunize them from antitrust laws.
6) Investigate deceptive trade practices and unfair methods of competition.
7) Exempt carriers from certain provisions of the Act.
Originally, the CAB also had authority over safety, but in 1958 Congress separated safety regulation from economic regulation (Bailey, Graham, and Kaplan 11). Between 1939 and 1965, the carriers holding certificates of public convenience and necessity issued by the CAB increased their overall operating revenues by a factor of 65, while passenger miles increased by a factor of 91. Air carrier regulation by the CAB was considered a success story, though some thought the growth in the industry might be in spite of the CAB rather than because of it (Jordan 1). One view is that under the control of the CAB, while growth was positive, innovative techniques and price competition within the industry were discouraged by the Board: "The sole method of competition under regulation was inflight services including, through the years, special meals, piano bars, seating configuration, free b...