History of US Airline Regulation
Part 6 : Present Day :
Remaining Regulatory Constraints on the US Airlines -
establishing and operating an airline
Many aspects of the
airline industry remain regulated, making it difficult for
new airlines to start business, and for any airline to
expand into new markets, as Virgin America has found to its
Part of a series on US airline
regulation and deregulation
- see extra articles listed in the right hand column.
It is an over-simplification to
suggest that the US airlines are now completely deregulated.
They aren't, and the effects of partial regulation/partial
deregulation interfere with the smooth operation of marketplace
economics and are at the heart of many of the remaining problems
in the aviation sphere, both for the airlines themselves and for
us as their passengers.
The airlines are constrained -
and our travel experience is impacted (usually negatively) from
the moment we arrive at an airport through the flight itself and
until we leave the airport at our destination.
In this and the following part of our series
on airline regulation we look at the areas where airlines are
still regulated or otherwise constrained from experiencing the
full effects of an open/free marketplace.
Evolving - and Continuing - Regulation and
When the Wright brothers
first took to the air in Kitty Hawk, NC, in December 1903 there
were no regulatory constraints acting on them at all.
Aviation was a brand new field of endeavor, and so for some time
following, government participation, oversight, and control was
playing a game of reactionary catch-up, responding to problems
that presented themselves. The first part of this series
looks at the evolution of
commercial aviation prior to the development of substantial
regulation, and the second part of this series looks at
the evolution of airline
regulation between 1926 and 1979.
But the so-called
deregulation of the airline
industry in 1979 (discussed in part 3) did not dismantle and
remove all controls on the airlines.
We now look at some of the
major areas of airline operations that are still regulated - and
often inefficiently constrained accordingly by this regulation.
Perhaps the first place to
start an examination of remaining airline regulation should be at the start - the establishment of a new
While new airlines are now
free to operate pretty much wherever in the US they may wish to,
it is a non-trivial process to start a new airline. This
was most graphically and most recently illustrated by Virgin
America's incredibly long and tortuous path to getting approval
to start operations in the US.
A new airline has to be
approved to operate scheduled airline service in the US by the
Department of Transportation - a process that typically takes a
year or more to complete. The new airline has to
demonstrate competencies in many areas, and also has to pass
tests as to its ownership and its management/control, with
limits on how much foreign ownership and effective foreign
control can be allowed.
These limits - and the
objections by other US carriers who claimed the new Virgin
America would be breaking these limits - delayed the new airline
from gaining approval from the Department of Transportation for
an extended time period, with the net result that the existing
airlines were able to beat back and delay the entry of a bona
fide new competitor, during which time we all suffered from
fares that were higher than they could have been (and
subsequently became) with the entry of more competition,
and suffering fewer flight choices until Virgin America
The limits on foreign
ownership and control of airlines may (or, equally likely, may
never) have had some applicable rationale in the past, but in
today's internationalized world, where most of our lives are
surrounded by non-domestic products and services, and where, in
turn, much/most of our country's economy relies on exports,
imports, foreign subsidiaries and globalization in every form,
it seems anachronistic and unrealistic to restrict who can
operate airlines in the US.
There was - and perhaps
still is - some sort of irrational belief that foreign owned airlines might
either kill off American owned airlines (does this represent a
fear that foreign owned airlines are better than US owned
airlines?) or else might somehow only provide service on
profitable routes and ignore unprofitable routes, negatively
impacting the access to convenient affordable air travel for
many Americans (but tell me which US carrier isn't also
exclusively concentrating only on operating profitable routes -
none of the US owned airlines operate as charities, they are all
for-profit entities and operate based on where they can profit,
unconstrained by any thoughts of 'social good').
One other fear is that
somehow the US would become 'vulnerable' if foreigners owned our
airlines, or perhaps that they can't be trusted to do things
correctly, or some other ridiculous prejudice unfounded on fact.
In a sufficiently grave
national emergency, of course the federal government could
'confiscate' or commandeer all planes operated by any/all
airlines, whether they were foreign owned or not.
Flying a Plane
Let's move forward from the
remaining controls and restrictions on establishing and owning
an airline. Once an airline has been established in
conformity with the existing regulations and requirements, what
does it want to do?
Yes, it wants to start to
Now let's look at just some
of the myriad
of regulatory constraints that exist here.
Choosing a plane to operate
An airline can't just go and
buy any plane it wishes, from any manufacturer it chooses.
It can only choose airplanes that have been type certified by
the FAA as being safe/appropriate/whatever for use in the US.
This concept embodies within
it a strange belief that the government can do a better job than
the airlines at knowing which planes would be best suited for
the US aviation industry, and/or perhaps the omnipresent fear
that the airlines can't be trusted to make wise decisions on
own and, if left to their own devices, would massively
compromise safety issues and put us all at great risk.
Safety compliance isn't
viewed by any airline as a
cost to be minimized as much as possible. It is essential
business sense. An unsafe airline wouldn't stay in
business for long, and so airlines maintain safety practices as much
for hard business reasons as they do to comply with government
regulations or for any more altruistic reasons. It happily
happens that the self-interest and profit-maximizing desires of
the airlines coincides with making safety a paramount priority.
Do government regulations
actually add to and enhance the safety design and reliability of
new airplanes? Or do they just add to the development
cost, purchase price and leadtime of getting new planes to
Hiring a Pilot
We are all accustomed to the
concept that, for example, driving a motor vehicle on the road
is not a natural right that flows to us all as citizens, but
rather a privilege that is conditionally extended to us only if
we meet certain qualifications and observe certain behaviors,
and so there's no great excitement at revealing that pilots of
airplanes also need to be licensed.
But the licensing procedure
to become a pilot dwarfs anything required to drive a car, bus,
or truck, and indeed, the government has just increased six-fold
the number of hours flying time a pilot needs before he can fly
a passenger plane. This increase in hours was completely
unsupported by any rational justification, and merely was a
response to ill-informed pressure groups and vested interests -
our discussion on this point.
The net result is that the
cost of becoming a pilot has massively increased beyond anything
that could reasonably be expected/justified, and those costs
will inevitably flow through to us as passengers.
Oh - and if the airline
should want to crew the plane with only one pilot instead of two
- well, that's not something that would be allowed to happen,
Hiring Flight Attendants
Maybe the airline decides to
be the ultimate in no-frills airlines and to have no flight
attendants at all. After all, there are no flight
attendants on buses, and none on small regional planes.
Sorry, that's not going to
be allowed. FAA regulations mandate the provision of
flight attendants in proportion to the number of passengers on a
plane, whether the airline wishes to employ them or not.
They're there, ummm, 'for our safety'.
And then when the airline
goes to hire its flight attendants, it needs government approval
for its choices (security issues), and needs to meet training
standards for them too.
Maintaining the plane
We're all somewhat familiar
with the concept of preventative and scheduled maintenance with
our cars. We give them regular oil and lubes, we change
tires before they are worn treadless, and if the engine starts
to misfire, we'll take it in for a tune rather than wait for the
car to eventually breakdown by the side of the road.
of course adopt similar policies, for similar reasons of good sense and
prudence. But the government doesn't trust them to make
the right choices, and maintains a massive oversight program
through the FAA to determine exactly what maintenance needs to
be done, and how, and with what spare parts, and by who.
Some people might think this
could all be eliminated by merely requiring the airlines to
follow the manufacturer's guidelines and trusting the airlines
to do so, with the downside threat of unlimited liability if
they don't. But instead, the airlines are subjected to
massive inspection programs and record keeping, while at the
same time paradoxically being shielded from unlimited liability
in many situations.
Loading the plane with
passengers, freight and fuel
There is apparently no
restriction on how close passenger seats can be to each other.
But there are restrictions on the maximum number of passengers
that can be loaded onto each type of airplane, and additional
restrictions on the minimum amount of extra fuel the airline
must carry, whether it is needed or not, and additional
restrictions on the maximum weight of the plane at take-off.
Carrying extra fuel can
often both reduce the plane's ability to also carry more
money-making freight and increase the fuel burn rate due to the
extra loading of fuel that is going for a 'free ride'.
And the restriction on the
maximum take-off weight of a plane? Oh, that's sometimes
nothing more than the airplane manufacturer exploiting the
regulations. If you want your plane to be allowed a higher
take-off weight, you simply pay more money to (eg) Boeing and in
some cases they simply write you out a new certificate allowing
the plane to fly with a heavier load, while not making any
changes to the plane itself. It is hard to see how that
regulation is benefitting anyone except the airplane
Hiring and Firing Staff
We've already discussed some
of the constraints on the ability of airlines to choose the type
of people, and the number of people, they hire for crewing
But there's still more.
Not only must the airlines deal with unions for almost all their
employee groups, but they are subject to the provisions of the
Railway Labor Act (dating all the way back to 1926 and with its
roots based on 19th century labor practices and problems), and
their union negotiations are regulated by the National Mediation
It is unclear if this
results in an advantage or a disadvantage for either the
airlines or their employees, but whatever it is, it distorts the
'free market' in yet another area and adds another level of
Where and When to Fly,
The preceding regulatory
constraints are all more or less behind the scenes and don't
touch on the main and highest visibility aspects of deregulation
- the ability of airlines to choose where and when they fly, and
to set their own fares and terms and conditions.
At least these other
aspects of operating an airline are now deregulated, right?
Not as much as you might think, and for details on these issues,
please click now to the next part of this series which looks at
continuing regulation of
where and when
airlines can fly, how they can market, and other regulatory
Part of a series on US airline
regulation, deregulation, and whether or not there should be
reregulation introduced again now
- please see extra articles listed at the top in
the right hand column
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27 Aug 2010, last update
28 May 2011
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