Flying Cheap for the Holidays? Thank Jimmy Carter
WHY YOU SHOULD CARE
Because "the great deregulator" is not who you think.
By Daniel Malloy
Jimmy Carter was on the verge of winning the presidency in 1976 when he met with one of the most powerful companies in his home state of Georgia: Delta Air Lines. It wasn’t a happy get-together.
Carter informed the executives that he was coming after the Civil Aeronautics Board, the government regulator that controlled prices of airline tickets, among many other things. “They were very negative about it,” says Stuart Eizenstat, who served as Carter’s chief domestic policy adviser.
But Carter pressed on to allow more competition from upstarts against major incumbents like Delta, and the result was a landmark deregulation of the airline industry. Combined with deregulation of trucking and railroads during Carter’s one-term presidency, his remaking of America’s transportation landscape was largely overshadowed by domestic and foreign crises. Even though deregulation, particularly now, is more often associated with conservatives, these initiatives were a remarkable bipartisan coalition driven by leading liberals: Sen. Edward Kennedy, future Supreme Court Justice Stephen Breyer and consumer advocate Ralph Nader. The law Carter signed in 1978 helped create America’s competitive air travel system of today — for better or for worse.
So as you wedge into your bargain-fare middle seat this holiday season, thank Jimmy Carter.
“Carter was the great deregulator,” says Eizenstat, now senior counsel at the global law firm Covington & Burling. “It’s a huge, major accomplishment which he gets no credit for.”
In the pre-deregulation days, just 55 percent of airline seats were filled, and flying was expensive. Because prices and routes were set by the government, airlines competed on the quality of their food and crews. The hot pants and cold drinks are romanticized to some degree today, but flying was unquestionably a luxury.
Kennedy wanted to shake this up. In 1974 he hired Breyer, then a Harvard Law professor and veteran of the Watergate prosecution, to come up with areas of the economy where consumers could benefit from lighter regulation. They started with airlines, and a crucial turning point came on what was known as “frozen dog day.” According to Eizenstat, Kennedy was having trouble attracting press attention to the cause of airline deregulation, but when he staged a hearing in 1975 about how airlines transported dogs in chilly cargo holds, it set media tongues wagging — and drew eyeballs to the cause.
By the 1976 campaign, Carter had made a firm pledge to pursue airline deregulation — to the chagrin of Delta and other major carriers, who enjoyed their oligopoly. They had to thread a political needle, with Democrats taking on unions and Republicans challenging big business. Eizenstat recounts in his book, President Carter: The White House Years, how early surveys of Capitol Hill turned up myriad objections, and Carter’s own transportation secretary, Brock Adams, even came out against the idea. Critics were worried about airline bankruptcies (which did come to pass) and protections for rural service, among other quibbles.
But the administration and its allies on Capitol Hill were able to gradually marshal support — with the help of outside groups such as Nader’s and pro-deregulation airlines such as United — and push through a bill to phase out the CAB, while keeping a firm government hand on airline safety. Eizenstat says Kennedy and Carter worked well together, even though Kennedy would go on to launch a primary challenge to the sitting president in 1980.
Carter signed the bill into law on Oct. 24, 1978, writing that day in his diary: “I’m proud of having turned this hopeless case into success.”
In the ensuing years, Southwest and JetBlue surged, fares came down dramatically and airlines got more crowded. Those effects are popularly attributed to deregulation, though fares were already dropping before the bill became law.
A 2007 study by former Federal Aviation Administration official David B. Richards challenged the popular wisdom about deregulation saving consumers tons of money. His analysis found that “the grant of pricing freedom to the airline industry has generally resulted in average prices being higher than they would have been had regulation continued under the [CAB’s Domestic Passenger Fare Investigation] rate-setting policies.”
The domestic airline market also remains dominated by a few big players, thanks to mergers in recent years. Eizenstat acknowledges that flying today is far from a joy, but says stronger antitrust enforcement could help alleviate the fact that four airlines control 80 percent of the U.S. market. And the mere fact that you’re flying at all — as 4 in 5 American adults say they have — is an achievement.
As for your lack of legroom? That’s just supply and demand.
- Daniel Malloy, OZY Author Contact Daniel Malloy