Is Regulation Necessary? California Air Transportation and National Regulatory Policy

AIR transportation in the United States, as elsewhere in the world, is a regulated and protected industry.'The present system of economic regulation was established in the Civil Aeronautics Act of 19382 and has survived virtually unchanged despite vast changes in the character of the industry O and a review and reorganization of government control which resulted in the present statute, the Federal Aviation Act of 1958. 4 Government restriction of entry into the industry and regulation of fares has fostered unnecessarily 'high fares, encouraged uneconomic practices, and limited the variety of service available to the public.The performance of the largest air transportation market in the world provides convincing evidence that fares are much lower and service more responsive to public needs where restrictions on entry are absent 1.In many countries control is exercised directly by establishing a governmentowned and operated carrier which monopolizes or overwhelmingly dominates the transportation system.In some countries, the monopoly carrier is privately owned, but government-regulated.In a few countries, which include five of the world's largest air trans.portation systems (Australia, Brazil, Canada, Japan, and the United States), the government licenses companies to operate scheduled services in competition with the state airlines or, as in the United States, in competition with one another.2. 52 Stat 977 (1938).3. In 1938, the industry was still in its childhood.The first aircraft that offered even the promise of an unsubsidized profit (the Douglas DC-3) was still being introduced into service.Flying was a novelty reserved for the adventurous or for those whose business required maximum speed.In 1938, all the domestic trunklines (airlines performing mainline scheduled services entirely within the continental United States, excluding Alaska) carried 1,536,000 passengers.