1 A Brief History of U. S. Commercial Aviation Regulation and Deregulation The U. S. commercial aviation industry was regulated by the government for a period of 40 years, beginning in 1938 with. the passing of the Federal Aviation Act, and ending in October 1978 when President Carter signed into law the Airline Deregulation Act (ADA). There were 16 airlines in existence when the Federal Aviation Act was passed in 1938 (the so-called 'trunk lines'). The Act established the Civil Aeronautics Authority (CAA) as the industry's regulatory body. The Act was passed principally because it was felt that the free market, if allowed to continue unregulated for much longer, would put many of these firms into bankruptcy. It is possible therefore to view the CAA of 1938 (re-organized into the Civil Aeronautics Board (CAB) in 1940) as a response to a potential market failure at the time. In the 1930s, few air traffic markets could have efficiently"supported more than one airline operating in the market [Panzar (1980)]. Competition among the carriers was cut-throat, and it was felt that the near bankruptcy of the airlines in the period was caused principally by the competitive bidding system used by the Post Office in allotting airmail subsidies [Keeler (1972), Caves (1962)].

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1: Introduction.- 1.1. A Brief History of U.S. Commercial Aviation Regulation and Deregulation.- 1.2. Critique of Other Studies.- 1.3. A Production Model of the Airline Firm.- 1.4. Measuring Technical Efficiency in an Airline Network.- 2: Previous Studies on U.S. Airline Deregulation.- 2.1. Economic Research on U.S. Airline Deregulation.- 2.2. Operations Researchers' and Transport Planners' View of Airline Operations.- 2.3. Geographical Aspects to U.S. Air Traffic Distribution.- 3: The Setting: Trends in U.S. Commercial Aviation.- 3.1. The National Airways System.- 3.2. Patterns in U.S. Commercial Aviation 1969-88.- 3.3. Measures for Summarizing Airline and Airport Traffic Distributions.- 3.4. U.S. Air Carriers 1969-1988.- 3.5. Continental and American Airlines' Traffic Patterns, 1969-88.- 4: Development of a Production Model of the Airline Firm.- 4.1. The Airline Network-Defining a Network Variable.- 4.2. The Airline's Production Function.- 4.3. An Alternative View of the Airline's Production Process.- 4.4. Functional Form of the Airline Production Function.- 4.5. Frontier Production Functions and the Measurement of Technical Inefficiency.- 5: Data Description and Computation of the Production Variables.- 5.1. Data Provided by Continental Airlines.- 5.2. Computed Input and Output Variables.- 5.3. Principal Components Estimates of the 'EQUIP' Variable.- 5.4. Gravity Model Estimates and the Route Attraction Variable.- 6: Production Function Analysis of Continental Airlines.- 6.1. Cobb-Douglas Production Function Estimates for Continental Airlines in 1987/88.- 6.2. Measuring the Efficiency of Continental's Route System and Exploring the Characteristics of Inefficient Routes.- 7: Conclusions and Recommendations.- 7.1. Network Changes and the Role of Network Organization.- 7.2. Airline Level Analysis and Route Efficiency.- References.- Author Index.