“It is a special pleasure for me today to sign into law the Airline Deregulation Act” – so said President Jimmy Carter in the White House in 1978.
“This legislation will permit us to achieve two critical objectives. One is to help our fight against inflation. And the other one is to ensure American citizens of an opportunity for low-priced air transportation.
“With this act, airlines can reduce their fares up to 50 per cent, opening up air travel to millions of Americans who would not otherwise be able to afford it.”
Until that moment, the government set most of the airfares within the US. Whether you wanted to travel on a sunny Friday in August or a wet Wednesday in January, and whether you booked months or minutes ahead, the ticket cost the same. Price controls bred an inefficient industry beyond the financial reach of normal people.
Only within a couple of large states – California and Texas – were airlines able to compete freely. President Carter, who was laid to rest this week aged 100, saw how carriers like Southwest Airlines were thriving. He believed the rest of the nation deserved the same freedom to fly.
Carter faced deeply entrenched opposition from the airlines: Delta warned the survival of the airline industry “could very well be in doubt”. But he persuaded Congress to pass an act that handed “the quality, variety, and price of air services” over to the free market.
All the old rules that restricted routes and schedules and fixed high fares were shelved. Any airline that could demonstrate to the Federal Aviation Administration that it was safe was free to fly anywhere within the US at prices of its choosing.
The airlines’ prophecies of doom for travellers looked ridiculous as fares tumbled and new routes were launched. Southwest, previously confined to Texas, led the charge. The then CEO, Howard Putnam, told me: “The first interstate route we picked was Dallas Love Field to New Orleans, with seven round-trips a day. Immediate success.”
Southwest’s share of the US aviation market trebled within five years.
Even though the benefits of free and fair competition promptly arrived as President Carter had predicted, in the UK and the rest of Europe vested interests fought to keep rivals at bay. During the 1980s, links between Britain, Ireland and the Netherlands slowly and painfully opened up to competition: a small Irish airline named Ryanair linked Luton with Waterford, and Virgin Atlantic was allowed to fly between Gatwick and Maastricht in the Netherlands. These were hardly headline routes and lost money.
A young accountant named Michael O’Leary was brought in to turn around or close down Ryanair. For a masterclass in cost-cutting, he flew to the Dallas HQ of Southwest Airlines and came back with some big ideas; as you may have noticed, Ryanair did not go bust.
The then European Community saw the way these baby steps could cut fares and increase flights. Eventually, the skies of Europe opened up in the 1990s. One of the first new entrants? A young entrepreneur named Stelios Haji-Ioannou. Thirty years ago, he started an airline called easyJet, flying a borrowed Boeing 737 between Luton and Glasgow.
“Southwest is really my role model,” he later told me. By emulating the best practices from US deregulation, easyJet hasn’t done too badly, either.
Flying in Europe is thriving on deregulation. Echoing President Carter’s vision from nearly half a century ago, Brussels says: “Any airline can operate any route within the EU, provided it meets the current safety and security EU standards.”
Brexit represented self-inflicted damage for British airline passengers, bringing new restrictions and fewer talented workers from Europe. But UK travellers still enjoy far wider horizons and lower fares and holiday prices because of deregulation. And despite some whispered warnings that deregulation would increase risk, the opposite has happened: the two safest airlines in the world (in terms of passengers flown without a fatality), Ryanair and easyJet, both have their biggest operations in the UK.
As a new president prepares to add more restrictions on the free market, note the words of Susan Dudley, director of the George Washington University Regulatory Studies Center: “When Americans open their smart phones to make an airline reservation, they should take a moment to thank Jimmy Carter, the humble one-term president whose bold deregulatory initiatives made such welfare-enhancing innovations possible.” And so should British travellers.
