The Impact of Deregulation on the Airline Industry

The aviation industry in the United States was facing several problems such as falling productivity, high inflation, rising labor costs, higher fuel costs and low economic growth. These problems led to the deregulation of the airline industry in 1978 with the Airline Deregulation Act that removed the various controls that influenced the decision power of the companies. The deregulation lasted about three years and the main objective was to increase competition between airline carriers and lower service prices.
The deregulation began with the easing of tariffs and liberalization of routes. During the regulations, customers paid high rates and hadn’t many options because there weren’t many airlines companies. After the deregulation, increased competition, new companies have emerged due to lowering barriers entry of new airlines industries and the price decreased. In this competitive environment, the company has increased its investments in quality and marketing as well as the efficient use of its fleet in order to attract more consumers. Also, the cost control has become a major factor in the management of airlines.
However, the rapid growth of the airline industry has triggered some problems like congestion at some airports, travel delays and low runway capacity especially during peak hours of travel. These problems are caused due to increased demand and the lack of investment in some airports.
The opening of foreign markets by the government was another benefit resulted of the deregulation. This change encouraged the airlines companies to expand their markets internationally. The growth of the airline industry also has created new jobs. Nowadays, the airlines can operate air services from any point in the US to any point of the world. The competition motivated companies applying technological innovations in order to increase efficiency and quality. These technological innovations allow planes fly faster, farther with low fuel consumption which leads a reduction in costs and increased efficiency. Also, the deregulation in the airline industry allowed the airlines companies to establish the prices, choose the level of service and the market that will meet.
Therefore, the deregulation in the airline industry has improved the quality of air services, decreased price, increased the quantity of companies in this sector, increased efficiency and the flexibility of the services provided by the airline, benefiting the American economy. Nowadays, the travelers have more options in the market and can travel anywhere of the world paying prices much lower than during the regulation. In other words, air transportation became more accessible to the general public.

The Impact of Deregulation on the Railroad Industry

The decrease in the regulation of various modes of transportation began in 1976. In the 80's happened several changes in transportation, communication industry and financial institutions. In that decade the rail companies gained greater freedom to sell and buy. The approval of the law ICC Termination Act of 1995 resulted in the deregulation of the rail industry that increased the freedoms enjoyed by the railroad industry in determining levels, setting prices and entering or leaving markets. The market-driven pricing of transportation services free from regulatory intervention was the fundamental objective of the deregulation.
The deregulation brought several benefits to the railroads and to their customers. The main benefits were a reduction in the price and the improvement of the quality of services provided. The Operating costs in Railroad Industry had a large reduction due to reduction in staff and the Railroads made rates more flexible. The elimination of labor costs through the extinction of some work rules is the main responsible for the reduction of the costs of this mode of transport. After deregulation, the competition among incumbent railroads was much more intense and the railroads realized that improving service and lower prices were the best way to compete.
However, deregulation brought some harm. For example, sometimes people in rural areas are victims because the deregulation made the railroads did not offer more passenger services which generated a decrease in the amount of service options in this area. Another negative effect generated was the wage loss of workers in rail industry that are at least 20 percent lower than they would be under regulation.
The railroads now have the capacity to meet the market changes as well as having more freedom in decision-making since it does not depend more on government sanctions improving the economic health of the railroad industry and keeping the government out of the railroad business. The high level of freedom gave the railroads the right to negotiate private contracts with shippers, the rail carriers are free to charge rates based exclusively on market conditions and allowed railroads to abandon unprofitable lines. Also, the number of carriers in this category decreased and consequently there was an increase in the number of regional and small rail carriers. The small and regional rail carriers took part of the infrastructure that large railroads did not consider important to the market. Despite the small and regional carriers have often cost disadvantage compared to the large rail system carriers, the smaller rail companies are more flexible in the attendance of demands of the shippers because they are not unionized, accept lower returns and seek to promote regional economic development. Therefore, the railway industry has had several improvements after the deregulation that influenced and benefited the American economy such as increased reliability, improvement on operational performance times, higher productivity, reduction of railway rates, improvements on infrastructure, the emergence of new technologies, greater specialization, improved quality of services demanded and increase customer satisfaction.

The Impact of Deregulation on the Trucking Industry

During the regulation period, the federal government regulated the price and competition from the trucking. There was little competition, the trucking was inefficient and the cost was high. The transport truck is one of the most important modes of transport for the American economy and many industries are dependent on this mode of transport. The deregulation was a gradual process that began in the late 1970s and continued until the 90s. The deregulation was Intended to Increase competition, to achieve a more productive and efficient economy.
After deregulation, the price decreased, there was a restructuring of routes, lower rates and improved quality of the services in some areas. The deregulation increased the productivity, speed and reliability of freight delivery reducing the cost of transport. In addition, new technologies are being used to improve quality and reduce delivery times. Currently, the system of trucking dominates the American market. It is the main transport means, especially when it comes to commodities due to the low value and high volume.
On the other hand, many problems arose after the trucking was deregulated. The deregulation on the trucking industry brought different results than other modes of transport. One of these results was the destruction of the competition. The large companies had wide lead over the others. The smaller companies have had to merge or leave the market, in other words the system is concentrated because the trucking industry is being dominated by a small number of large companies. In this competitive environment, truck companies have reduced labor costs. For example, the wages of truck drivers declined and working conditions in some companies aren’t the best to perform a good job with security. After deregulation, the number of accidents involving truckers increased result of poor working conditions.
Since the period of deregulation, the trucking industry dominates the American transportation system. Deregulation has generated increased competition which resulted in the domain of large companies. Nevertheless, there was a reduction in costs, an increase in speed of delivery often afforded by application of technological advances, improved quality of services provided, increased flexibility and a restructuring of routes. Therefore, despite the lower wages of truck drivers, the domain of large companies and the poor working conditions in some companies, in general, the deregulation benefited the Americans and the economy.