The reason for this pressure was that the government regulations were causing stress on the U. S airline industries and were the main source of inflation. Shortly after hearings of the Senate Committee on Administrative Practice and Procedure viewed that the prices would reduce if the government constraints on competitions reduced. Civil Aeronautics Board in 1975 in their report agreed with this conclusion. The report said that the CAB would no longer justify public utility type pricing and entry controls and that the airline industry was more of a naturally competitive one.
Mr. Kahn heightened the decision for the board to give the airlines easier access to routes and greater pricing freedom. Before the deregulation, the U. S airline industry operated in a relationship between costs and revenues. The airfares had to depend on the route and through consultations with the airlines flying in those routes according to a cost-plus formula. Many of the routes less frequently traveled were bankrolled by higher fares charged on most of the major routes. This method reduced the need to compete based on operational efficiency and satisfaction of the consumer and meeting their desires.
This kind of system guaranteed the airlines that the cost would be fully covered. The deregulation forced the airlines to be more efficient if they desired to succeed due to high competition. The Deregulation opened the U. S airline to free-market principles which led forth to a more affordable industry. Opened the market to competitors and other low- cost airlines. It also led to the disappearing of many carriers through mergers, bankruptcy, and acquisitions. It became a world with a struggle for survival where only the strong survive.
The General Accounting Office (GAO) reported a fare decrease by 21% from the year 1990 to 1998. The quality of service also improved in one hundred and sixty-eight from the one hundred and seventy-one airlines examined, this was due to competing for service from a low fare carrier.
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