The Impact Of Deregulation On Delta Air Lines

The Airline Deregulation Act of 1978 caused one of the moment significant shifts in United States aviation history. While some implications were evident right away, other consequences were noticeable later down the line. Several airlines struggled to cope with the changes in the market and ultimately perished. Today, Delta Air Lines stands tall as one of the big four carriers in the country. However, it did feel the impact of the new law along the way.

The industry changes

The policy ultimately removed federal government control over many crucial factors within US aviation. Therefore, there was a considerable transition for stakeholders to deal with.

Previously, the Civil Aeronautics Board (CAB) regulated domestic interstate routes. The group set most of the routes, schedules, and even fares. Now, revised rulings gave greater freedom to airlines and assisted them to have control of their services.

Furthermore, a critical change that deregulation brought was that it became easier for startups to rise within the market. Newcomers now had the platform to develop, and existing outfits had the opportunity to enter into new segments. Officials were also keen to increase competition and deter carriers from raising prices while minimizing operations.

It’s been well documented that the likes of Braniff International Airways, Capitol Air, the original Frontier Airlines, Pam American, and Eastern Air Lines all faced bankruptcy in the decades that followed the act. Even though several of these carriers were also struggling with several other issues, there was an increase in pressure with deregulation, and it was hard for many veterans to cope with the changes.

Most noticeably, low-cost airlines started to disrupt the status quo. Meanwhile, some experienced players were now catching up with their competitors.

Met with challenges

Delta is one of the legacy carriers that managed to survive the challenges that deregulation brought. While several of its competitors have fallen along the way, the Atlanta-based operator had endured and stood the test of time. However, it was not all smooth sailing for the company following the introduction of the act.

During the middle of the 1980s, Delta was the fifth largest airline in the country. During this period, the New York Times highlighted how deregulation tightened competition around the firm. Delta was a stronghold across the eastern side of the US, but it did not have such a grip across the nation.

The carriers that were making the most of the opportunities following the law change were continuing to serve more passengers by the day. Moreover, they were expanding state by state. Meanwhile, Delta was facing issues with labor costs. Agitations within airline workforces were at the forefront of the aviation industry following deregulation.

Delta had one of the highest costs of labor in the market, and it was facing the first significant disagreement with its employees since its founding. Along with this, its intelligent yet cautious approach when it came to expansion was becoming outdated as its competitors were growing rapidly.

Addressing concerns

To try and keep up with the lowered fares across the industry, Delta turned to the innovative technology of the time. It consulted Control Data Corporation to use computer software to forecast demand and provide the optimal mix of full-price and bargain fares for the 86 million seats that it was providing per annum.

The airline also started to try and establish new hubs in Dallas and Cincinnati to counter revenue losses at Atlanta due to increased competition in Georgia. Additionally, it launched marketing partnerships with the likes of Japan Airlines and Western Airlines to help garner new customers.

The relationship with Western was taken a step further in 1986 when Delta merged with the Californian outfit. Speculation of the airline merging was rife for months before the announcement, but it wasn’t clear who the deal would be with.

Subsequently, in 1987, Western’s branding was no longer to be seen, and employees across the two carriers joined together. Moreover, Delta’s livery was coated on all of the Los-Angeles-based carrier’s planes.

As a result of the merger, LAX became a useful gateway for Delta for flights departing on the Pacific Coast. Along with this, Western’s Salt Lake City hub became a major asset.

Taking it a step further

Delta was now gaining confidence to expand in the new era. Some concerns were starting to dwindle, and it was on its way to break further ground as the 1990s approached.

Meanwhile, Pan Am was on a downward spiral during this time. Alongside several factors across the board, deregulation wasn’t so kind to the iconic carrier. In 1991 Delta won a bid to acquire some of the airline’s key assets.

The deal included the firm’s transatlantic operations. It also included the Pan Am Shuttle, which offered frequent flights between  Washington, D.C., and New York. This purchase positioned Delta as the third-largest carrier in the US, and it also became a truly international player. Notably, Pan Am was no longer operating by the end of that year, and Delta would outlast another previous competitor.

Altogether, deregulation has had a long-lasting impact on US aviation. The effects are still evident today. Even though Delta was faced with challenges, it managed to adapt and is still one of the leading carriers in the country. Nonetheless, the bill has allowed other operators to rise, such as Southwest Airlines and JetBlue, giving new rivals to the carrier in place of its previous counterparts.

What are your thoughts about the impact that deregulation had on Delta Air Lines? What do you make of the company’s progress since? Let us know what you think about the process in the comment section.