Civil Aeronautics Board
The Civil Aeronautics Board was an independent agency of the federal government of the United States, formed in 1940 out of the prior Civil Aeronautics Authority and abolished in 1985, best known for tight economic regulation of the US airline industry through 1978. The CAB's regulatory powers originated in the 1938 Civil Aeronautics Act, which created the Authority and two other bodies. A 1940 amendment re-arranged 1938 Act duties, with economic regulation going to the CAB and most air safety/operational matters going to the Civil Aeronautics Administration, a significant exception being air accident investigation which went to the CAB. The 1958 Federal Aviation Act amended the 1938 Act, with some non-economic CAB functions split off. The 1966 Federal Transportation Act gave CAB's accident investigation duties to the newly-created National Transportation Safety Board.
In 1977 the Air Cargo Deregulation Act substantially reduced the CAB's ability to regulate air freight. The Airline Deregulation Act of 1978 substantially reduced the CAB's passenger airline powers effective 1979, phasing out remaining powers until 1985 abolishment. Residual economic regulatory powers went mostly to the Department of Transportation, some to the US Postal Service. The period 1938–1978, when CAB/Authority economic power was at its height, is known as the regulated era of the US airline industry.
While the CAB is best known for economic regulation of airlines, its powers extended to related companies characterized as indirect air carriers, such as air freight forwarders, a significant industry of its own. Further, some airlines were able to escape most CAB regulation, while the CAB exempted still others from regulation. CAB regulations resulted in a complex system of many different types of airlines defined by different regulatory limits, as outlined below.
[|Powers]
The authority of the Civil Aeronautics Board to regulate airlines was established by the Civil Aeronautics Act of 1938. The 1938 Act was amended by the Federal Aviation Act of 1958, but the main effect of that was to establish the Federal Aviation Agency, which among other things regulated airline operations and safety. The 1958 Act contributed the CAB's safety rule-making power to the FAA. The 1966 Department of Transportation Act, which established the US Department of Transportation, established the National Transportation Safety Board which absorbed the CAB's air accident investigation duties. Unlike the FAA, which became part of DOT in the 1966 Act, the CAB remained an independent agency.While CAB regulation suppressed free competition, it provided security for the existing airlines, avoided gluts and shortages of passengers on certain routes, and secured airline service for communities that would have otherwise been served less, or not have been served at all.
CAB authority included:
- Entry Companies could not enter the airline industry, either for domestic or foreign routes unless certificated by the Board. The Act stated: "No air carrier shall engage in any air transportation unless there is in force a certificate issued by the Board authorizing such air carrier to engage in such transportation." However, as described below, the Board also had the ability to provide exemptions from this and other Act requirements. The Board, when issuing a certificate, was required to determine a carrier was "fit, willing and able" to provide air transportation, that it would obey the Board and Act, and that the certificate issuance was required by "public necessity and convenience". Further, the Board had to specify for each certificate the end and intermediate points of all routes. Thus the CAB not only determined entry into the industry, but also the specific routes a carrier served. It could also put limitations on that service. For instance, the CAB could approve a route from A to B to C but not allow the carrier to fly nonstop from A to C.
- Exit An airline could not leave a market without CAB approval.
- Fares The CAB had broad authority to set or limit fares. There was a fairly uniform national fare structure based on distance flown set by the CAB. In particular, carriers serving the same markets were held to the same fares, so competition on the basis of fares did not exist, other than in the final years of the CAB when it experimented with liberalization. Fares also tended to underprice short-haul markets and overprice longer-haul markets.
- Mergers The CAB had the authority to approve or disapprove mergers, not only between airlines, but between an airline and any other common carrier or a company engaged in any other phase of aviation. Moreover "merger" was defined broadly, encompassing more general concepts of common control.
- Interlocking relationships Any interlocking relationship, such as common directors, between airlines, or between an airline and a common carrier, or a company in any other phase of aviation, required CAB approval.
- Inter-carrier agreement All agreements between carriers had to be filed with the CAB, which evaluated whether such agreements were in the public interest. If not, they were not approved. In 1970, the CAB reviewed over 1000 such agreements, many of a routine nature such as the cooperation of airlines at a particular airport. This could also work, on occasion, to shield airlines from anti-trust laws.
- Unfair competition and Misleading business practices. The Act authorized the Board to investigate and correct such behavior.
- Subsidy The Board was authorized to subsidize carriers. As shown below, in 1978 the CAB paid subsidies to a dozen carriers, including nine that flew jet equipment.
- Exemption The Board had broad authority to provide exemptions from provisions of the Act. For example, originally all US non-scheduled carriers were authorized this way, the Board simply exempting them from certification. As discussed below, in 1952, the CAB also simply carved out a blanket exemption for airlines flying "small" aircraft in scheduled service.
Not included
The Act also prevented the CAB from regulating certain things: frequency, equipment, accommodations and facilities. It was up to the carrier to determine what aircraft it flew and how often and what airport or ticket facilities it built/rented, and so forth. However, the CAB did generally require a minimum adequate service, e.g. often two flights/day, in a market.Indirect air carriers
The 1938 and 1958 Acts defined an air carrier as "any citizen of the United States who undertakes, whether directly or indirectly to engage in air transportation." The indirectly clause gave the CAB jurisdiction over indirect air carriers, which included such activity as freight forwarders and tour operators. In 1977, US air freight forwarders generated $1.6 billion in revenue, about $8 billion in 2026 terms. The two largest air freight forwarders that year were Emery Air Freight and Airborne Freight. By comparison, scheduled air freight revenue for the US air carriers in 1977 was $1.66 billion, against total 1977 US scheduled air carrier revenue of $19.8 billion. Air freight forwarders accounted for about 40-45% of total scheduled US carrier air freight demand.History
Prior to the 1938 Act, the airlines in the United States asked for regulation. There was, for instance, little air traffic control. That which existed was provided by the biggest airlines themselves; others saw obeying it as voluntary. There were significant high profile crashes that killed prominent people and brought air travel into disrepute. The industry was growing quickly, but still losing money. The airlines formed the Air Transport Association of America and one of its first activities was lobbying for government regulation. The 1938 Act created three positions/bodies: the Civil Aeronautics Authority, an Administrator of Aviation and an Air Safety Board. Due to overlap in jurisdiction, friction developed between the bodies. The 1940 Amendment to the Civil Aeronautics Act redistributed functions between two new bodies: CAB and CAA, with powers split between them as outlined in Powers above.File:Charles S. Murphy and Bobbie R. Allen.jpg|thumb|Charles S. Murphy, Chair of the Board and Bobbie R. Allen, Director of the Bureau of Safety, circa 1966
The 1938 Act superseded the Watres Act, which had regulated commercial aviation since the mid-1920s.
Other predecessor agencies included the Aeronautics Branch, the Bureau of Air Commerce, and the Bureau of Air Mail, Interstate Commerce Commission.
The first major air accident investigation led by the CAB was the 1940 Lovettsville air disaster.
Deregulation
In 1975, Senator Ted Kennedy, in his capacity as Chair of the Subcommittee on Administrative Practice and Procedure of the U.S. Senate Committee on the Judiciary, assisted by Stephen Breyer, then a counsel to the judiciary committee, held widely-reported hearings on the CAB. These hearings were later seen as the beginning of the process which ended in airline deregulation by the end of 1978. These publicized, among much else, the success that carriers like Southwest Airlines and Pacific Southwest Airlines had as intrastate airlines in Texas and California, despite the much lower fares they charged, and the degree to which the CAB acted primarily in the interests of the airlines, rather than consumers Links to the transcripts of those hearings, the associated evidence and exhibits, and the report that Kennedy and Breyer wrote, are in [|External links] below.Also in 1975, President Ford appointed John E. Robson as CAB Chair. Under the chairmanship of John Robson, the Civil Aeronautics Board "in April 1976 did the unthinkable, becoming the first regulatory body to support deregulation," which President Gerald Ford first spurred in February 1975 with a proposal to abolish the CAB altogether. Robson was followed as CAB Chair by Cornell University professor Alfred E. Kahn, appointed by President Jimmy Carter. Kahn was a well-known specialist in regulatory economics, having written one of the standard texts and had previously been chairman of the New York Public Service Commission, the body regulating utilities in New York State. The CAB continued to be a focus of the early deregulation movement, and its dissolution was one of the most conspicuous pioneering events of that movement. Air freight was deregulated in the 1977 Air Cargo Deregulation Act, as this was seen as much less controversial. The Airline Deregulation Act of 1978 specified that the CAB would eventually be disestablished — the first federal regulatory regime, since the 1930s, to be totally dismantled — and this happened on January 1, 1985. The remaining tasks were transferred to the Secretary of Transportation except for a few going to the U.S. Postal Service.