Do you think that Civil Aeronautics Board (CAB) should have stayed intact in order to regulate airlines or do you agree that deregulation and removing the CAB was a good move? Why?
Recession, price wars, and sharply rising fuel costs have gravely wounded the airline industry. What is the difference between Southwest, Delta, American and those that have perished: Braniff, TWA, and Pan Am?
Deregulation in the airline industry brought more positive outcomes.
With the presence of the Civil Aeronautics Board, the market for airline services became distorted in favor or big airline companies. With the CAB, the market for airlines was seemingly run in a planned economy which should not have been done in the first place because the U.S. is a capitalist economy. Central planning is incompatible in any market economy.
CAB spawned a monopoly in the domestic and international flights.
American Business (2012) noted that prices for flights were determined by the CAB based on the costs provided by the airlines themselves so that the airlines were guaranteed to make a profit.
Truly, the presence of the CAB defeated the natural flow of the market for airlines. Prices were not the result of the interaction of the supply and demand for airline services.
With the dissolution of the CAB in late 1970s brought about a market revolution in the airline industry.
Siddiqi (n.d.) showed the following positive outcome of ...
The solution showed that the airlines industry positively benefited from deregulation. Deregulation spawn the inflow of airlines companies providing high quality services.