of the Problem
By the mid-1970s in the United States, a variety of events ranging from the Vietnam War to the Watergate Scandal had cascaded into a loss of confidence in federal government across all segments of the political spectrum. In the economic arena, high rates of inflation, economic stagnation, oil shocks, and other misfortunes had caused the federal government's management of the economy to be perceived by many citizens as a failure.
In the midst of the political and economic turmoil which characterized the United States in the 1970s, a momentum for regulatory reform was building. With respect to the airline industry, a momentum for deregulation was building in the face of resistance to such a policy initiative by most of the minor and some of the major American airline companies.
The deregulation of the airline industry began to gain acceptance as a policy alternative, as policies began to be implemented in the marketplace. In October 1978, President Carter signed into law the Airline Deregulation Act. The act included a deadline of 1985 for a congressional determination as to whether or not the CAB should be terminated, and, of course, the CAB was eventually terminated. Deregulation in the American airline industry had arrived.
In the first full year following deregulation, several carriers eagerly sought and obtained new routes. During this same time period, the worst economic recession since the depression of the 1930s hit the country. Whether as a result of deregulation, the severe recession, or of a combination of the two, the airline industry suffered grievously, and that suffering has largely persisted into the 1990s. By the end of the second full year of deregulation, some carriers, many old line, had failed or were on the verge of financial failure. By early-1983, the industry had developed into one in which approximately six major carriers accounted for the bulk of the trunk traffic within th...