Airline Law and Regulation: A Brief History [POLICYbrief] - YouTube

The airline industry is one of the most heavily regulated and subsidized industries in the

country.

In 1925, began in subsidy with the Kelly Act that allowed the post office to begin paying

private airlines to transport air mail.

Now in 1930, the Air Mail Act was passed, allowing the, uh, postmaster general t- broad

authority for reforming the way that air mail, uh, was paid for.

So the postmaster general exceeded his authority in convening many of the airlines and basically

deciding who was going to survive, who would fly what routes, and often, uh, not taking

the cheapest bids in what became known as the Spoils Conference, in what was then a

scandal.

When this came to light, all of the contracts were voided, and FDR went to the military

and asked them if they'd be willing to fly the mail.

Of course, they said yes.

Unfortunately, they weren't familiar with the terrain, uh, and there were a series of

airline accidents in the 1930s with the Air Force.

And so it was eventually turned back over to the US airlines.

In the late 1930s, the Civil Aeronautics Administration, uh, which was the original regulator of the

airlines, they carved off some of the functions into the FAA, renamed it the Civil Aeronautics

Board, and that was the primary regulator of the airlines through the late 1970s.

The Civil Aeronautics Board saw its mission as, uh, ensuring the profitability of the

airline industry.

We usually think about regulation as being intended to protect the consumer, but there

the Civil Aeronautics Board, uh, wanted to avoid what they called "ruinous competition."

So they decided, what airlines would be allowed to fly which routes and the prices that were

allowed to be charged.

And there are subsidies for the airlines today.

For instance, recently many of the major airlines have been through bankruptcy, pensions were

moved off of their, of their balance sheets onto the federal Pension Benefit Guaranty

Corporation.

Airlines receive fuel tax subsidies.

And airports aren't paid entirely by ticket prices.

They're paid for by localities.

When a locality wants a new flight, they'll often offer guaranteed revenue or subsidies

from the community to the airline in exchange for those.

Uh, so there's some limitations in law, on what an airline can do with its subsidies.

They can't offer pricing that is too low, uh, but beyond that, the law had very little

to say in this regard.

Under the Airline Deregulation Act, there's really a uniform set of regulation of air

travel across the US.

Individual states aren't able to regulate it, and consumers aren't able to go to state

court with state law-based claims against airlines.

So individuals have rights against the airlines.

Those are generally defined in federal law.

For instance, if you have a, uh, disability and you want to be accommodated, you have

the Federal Air Carrier Access Act.

Meanwhile, the airlines have a dedicated agency in the Department of Transportation that regulates

them and sets standards for their business, and is the venue through which consumers can

complain.

Individual rights are generally determined at the federal level within aviation, uh,

rather than at the state level.

So does purchasing a ticket guarantee you a seat on the flight?

Since virtually the beginning of commercial aviation in the US, airlines have sold more tickets on many flights

than they have seats.

And that's because they know that not everybody is going to make it to a given flight.

However, you're almost virtually certain to be able to have a seat on the flight for which

you buy a ticket. That's because airlines are pretty darn reliable, even though airlines

do overbook, um, it's very rare that they turn people away that have a ticket for that flight.

In April 1972, Ralph Nader booked a flight on Allegheny Airlines from Washington, DC

to Hartford, Connecticut.

Allegheny Airlines booked 107 passengers for 100 seats.

And what they had said to him was, "You know, look, we'll give you an alternate flight.

We'll get you there connecting in Philadelphia.

And by the way, you have ten minutes to connect."

He didn't do that.

He took a flight to Boston instead.

He had a staffer pick him up, and then he went and sued.

And it made it to the Supreme Court.

And what the Supreme Court said was, ultimately that there was a private right of action to

sue an airline for overbooking, because even back then it was so rare.

What governs your relationship to airline is the airline's contract of carriage.

And that's going to lay out the airline's responsibilities, which is, generally speaking, to transport you

from the city that you're beginning to your destination city.

They're not obligated to provide you that transportation on the specific flights that

they've sold you a schedule for.

They're going to provide you transportation in a reasonable period of time around the

schedule, uh, but not necessarily on those flights.

So for instance, if weather causes a flight to cancel, they can put you on another flight,

maybe it's a nonstop, maybe it connects in a different city.

You don't have a right to connect in the city that you'd originally schedule to connect

in.

If they're involuntarily denied boarding, consumers are entitled to compensation under

Department of Transportation rules.

They're entitled to compensation based on the length of time that it takes them to get

them to their final destination, but up to four times the ticket cost, or $1,350.