Since 1938, the federal CAB had regulated all domestic interstate
air transport routes as a
public utility, setting fares, routes, and schedules. Airlines that flew only
intrastate routes, however, were not regulated by the CAB but were regulated by the governments of the states in which they operated. One way that the CAB promoted air travel was generally attempting to hold fares down in the short-haul market, which would be subsidized by higher fares in the long-haul market. The CAB also had to ensure that the airlines had a reasonable
rate of return. The CAB had earned a reputation for bureaucratic complacency; airlines were subject to lengthy delays when they applied for new routes or fare changes, and were often not approved. For example,
World Airways applied to begin a low-fare New York City–to–Los Angeles route in 1967; the CAB studied the request for over six years, only to dismiss it because the record was "stale". Leading economists had argued for several decades that the regulation led to inefficiency and higher costs. The
Carter administration argued that the industry and its customers would benefit from new entrants, the abolishing of price regulation, and reduced control over routes and hub cities. In 1970 and 1971, the
Council of Economic Advisers in the
Nixon administration, along with the
Antitrust Division of the
United States Department of Justice and other agencies, proposed legislation to diminish
price collusion and entry barriers in rail and
trucking transportation. While the initiative was in process in the
Ford administration, the
Senate Judiciary Committee, which had jurisdiction over
antitrust law, began hearings on airline
deregulation in 1975. Senator
Edward "Ted" Kennedy took the lead in the hearings. The committee was deemed a friendlier forum than what likely would have been the more appropriate venue, the
Aviation Subcommittee of the
Commerce Committee. The Ford administration supported the Judiciary Committee initiative. In 1977, President
Jimmy Carter appointed
Alfred E. Kahn, a professor of
economics at
Cornell University, to be chair of the CAB. A concerted push for the legislation had developed from leading economists, leading
think-tanks in Washington, a civil society coalition advocating the reform (patterned on a coalition earlier developed for the truck-and-rail-reform efforts), the head of the regulatory agency, Senate leadership, the Carter administration, and even some in the airline industry. The coalition swiftly gained legislative results in 1978. On November 9, 1977, President Carter signed the Air Cargo Deregulation Act. Deregulating the air cargo business was seen as less controversial. The measure allowed any existing interstate scheduled cargo carrier, including commuter carrier, to fly air cargo anywhere within the 50 states (with certain restrictions on Alaska) and largely charge what they wanted. After a year, any other citizen of the US could apply for a certificate to do the same. A substantial beneficiary was
Federal Express, as this allowed the then-young company to operate large aircraft (e.g.
Boeing 727s). It had previously been restricted to flying
Dassault Falcon 20 aircraft. Dan McKinnon would be the last chairman of the CAB and would oversee its final closure on January 1, 1985. == Legislative terms ==