Regulation of Transportation Industries Aviation

Regulation of Transportation Industries

Aviation Industry

Aviation industry is large connecting different parts of the world which has been the reason business can be conducted from one place to another within the shortest time possible. It is the airline industry that has enabled globalization to take effect in other industries. The airline industry has enabled people to operate at an international level due to the interconnectivity of the markets which changed the nature of how business is conducted. The rise in the number of travelers across the globe for both business and leisure and the choice of air as the mode of transport saw the industry grow bigger. Different carriers have emerged making the industry one of the most competitive in the transport industry.

The industry has however been affected by various issues including recession in the early 1990's, the economic crisis and to a larger extent terrorism which saw a decrease in the number of travelers across the world. Most airline companies as a result made losses and had to look for alternative ways to restore customer confidence in the use of air transport and improve on profitability. The terrorist attacks which targeted planes shook the industry and as a result certain routes had to be abolished by the carriers as a security measure to ensure safety standards and at the same time they increased security in the industry to gain back the public's confidence. Technology has been used and screening measures for both cargo and passengers have been enhanced which has seen the industry's profitability increase over the years (Department of Homeland Security, 2012).

For many years the industry was regulated and the government closely monitored the industry. It was the duty of the U.S. government to determine the rates and routes which were to be followed by the carriers. The industry was however, deregulated in the year 1978 with the passage of the Airline Deregulation Act. There were several factors that led to the deregulation of the industry; the rise in the fuel price contributed immensely to the government's decision to deregulate the industry. It became very expensive to travel by air which led to fall in businesses and at the same time it became costly to maintain the airlines and remain profitable. The industry was therefore left to be controlled by the market where by the rates were market driven. Several restrictions were lifted and the industry has since become a free market where the rates and the routes are controlled by the individual airline companies which has increased competition in the industry leading to price reduction (Avjobs, 2012).

Considerations supporting increased governmental regulation are based on the possibilities of the industry growing beyond the reach of many if left to be controlled by the market forces. Regulating the industry cushions the consumer against the increase in rates which might impact the economy in terms of reduction in businesses due to the high costs of travel and as well as the reduction in the tourism sector which generates revenue and as well attract more investors.

Regulation would ensure that reasonable rates are set for the consumer. When regulated certain standards are set by the government which protects the consumer as well as the ecosystem so that the activities of the airline company do not endanger the lives of the citizens in terms of pollution among other environmental hazards that they might cause.

There are however several arguments in support for deregulating industry, it is argued that by being deregulated the industry has become competitive which has been good for business purposes as competition among the new entrants and the old airline companies drive down the rates. Deregulation has led to growth in air travel where it has attracted many investors whereby the world has been interconnected making air travel the most efficient which has increased international business between different economies. Deregulation has enabled the airline companies to remain operational despite the rising cost of fuel whereby the individual companies are able to hedge for fuel and remain profitable for a period of time despite the skyrocketing fuel prices which wouldn't have been the case were the industry still regulated (GAO, 2006).