The effects of airline deregulation on airline safety: an econometric analysis

Abstract

After an unfortunate series of accidents in the mid 1930’s the Air Transport Association (ATA) lobbied Congress for regulation of the industry. The ATA claimed that unfair competition was endangering the public safety. The Civil Aeronautics Act of 1938 created the Civil Aeronautics Board (CAB) and gave the CAB the authority to regulate the industry. During the regulation era airline ridership increased and safety improved.

During the regulation period, opportunity for comparing the safety record of the regulated industry with the record of the unregulated portions of the industry was limited. The few attempts made rendered inconclusive results.

During a period of high inflation and high interest rates in the 1970’s interest in deregulating the airlines arose. With passage of the Airline Deregulation Act of 1978, interest in the effects of regulation on airline safety was renewed. More than a decade has passed since deregulation. The industry has continued to improve its safety record during the deregulation period. The question remains: "How has deregulation affected airline safety?"

In this study records of airline accidents and incidents investigated by the National Transportation Safety Board are examined. The occurrences are divided into those with causes that are under the airlines control and those that are not under their control. Those under the airlines control are regressed against time and a dummy variable for deregulation. The possible effects of airline profitability on the results are also explored.

The results indicate that deregulation had an adverse effect on airline safety. The effects of alternative formulations are also examined. The effect though statistically significant is small. It does not suggest the need to return to a regulated airline industry. But, it does suggest the need for additional research into the connection between airline safety and competition. 、