Civil Aeronautics Act (1938)

Douglas B. Harris

Excerpt from the Civil Aeronautics Act

[T]he [Civil Aeronautics] Authority shall consider the following ... as being in the public interest ... the encouragement and development of an air-transportation system properly adapted to the present and future needs of the foreign and domestic commerce of the United States, of the Postal Service, and of the national defense ... [and] the regulation of air commerce in such manner as to best promote its development and safety...

The Civil Aeronautics Act of 1938 (CAA) (PL 75-706, 52 Stat. 973) created a Civil Aeronautics Authority, later called the Civil Aeronautics Board (CAB), to centralize commercial and safety regulation of civil air travel. In addition to the five-member "Authority," the act created a civil aeronautics administrator and a three member Air Safety Board, all appointed by the president subject to the advice and consent of the U.S. Senate. Moreover, key provisions of the act involved the allocation of U.S. Post Office contracts to airlines to carry mail, as well as regulations covering the registration and safety of air travel. The authority to regulate air travel and the airline industry was based on Congress's power to regulate interstate commerce under Article I, section 8 of the Constitution.

EARLY FORAYS IN FEDERAL AIRLINE REGULATION

Congress's first major legislation regulating the airline industry was the Air Commerce Act (ACA) of 1926, situating both commercial regulatory authority and safety regulation in the Department of Commerce. In the decade that followed, technological advances in air travel and the likelihood that air travel soon would develop a consumer-orientation meant that additional federal regulation was needed. Questions regarding the fairness of the U.S. Postal Service's practices of contracting with specific airlines also spelled the need for regulatory reform.

In the era prior to the regular consumer air travel, government contracts to carry mail for the U.S. Postal Service determined the commercial viability of airline companies. According to economist Richard E. Caves, in the first years of the Roosevelt administration "the Postmaster General had canceled all existing contracts with airlines to carry air mail, on the basis of charges that they had originally been parceled out" during the Hoover administration through "a collusive spoils session" rather than competitive bidding. In response to the charges of collusion, Congress passed the Air Mail Act of 1934 that reformed the procedure by which airlines would compete for postal routes. Still, according to Caves, the Mail Act left airline deregulation too decentralized. As a result, "untenable" jurisdictional disputes arose between the Post Office (which continued to control bidding for the postal contracts that determined the commercial viability of new carriers), the Interstate Commerce Commission(which determined the rate of pay for postal routes), and the Commerce Department's Bureau of Air Commerce (which governed safety regulations).

CONGRESS CONSOLIDATES FEDERAL AUTHORITY OVER AIRLINE REGULATION

Congress passed the CAA to centralize the federal government's authority over airline regulation. In 1935, the Federal Aviation Commission (FAC), a board created by Congress in 1934 to study airline regulation and recommend policy, called for the creation of a centralized and independent authority to regulate the airline industry. Responding to FAC's recommendation, the Congress considered and eventually passed the CAA. The CAA both amended the ACA and transferred power over airline regulation from the Department of Commerce to a newly constituted and independent Civil Aeronautics Authority.

Senator Pat McCarran, Democrat from Nevada, was the primary author of the CAA. On April 14, 1938, McCarran introduced S. 3845, a bill to establish an independent civil aeronautics authority to regulate aviation-related commerce and safety. In floor debate, McCarran emphasized the likely increases in air traffic, the growing segment of the economy represented by aviation, and the reality that aviation would soon be a major source of inter-state transportation in the United States. On this last point, McCarran observed, "If we are ever to have safe, regular, and economically sound air transport, it must be administered by a strictly nonpolitical body. Safety regulations are largely nullified by political influences, and, in my opinion, the time is not far distant when the air-traveling public will rise up and demand reasonably safe air transportation." Although some senators opposed the creation of yet another new federal agency and maintained that the Commerce Department was adequate to the current needs of airline travel, the bill passed the Senate by voice vote.

In the House, Representative Clarence Lea was the principle architect of the act. House members heatedly debated Lea's bill, seeking to ensure that airline companies and routes from their districts and states would not lose existing advantages or endure new disadvantages from the new regulations. Despite a procedural attempt to delay or kill the bill, the House passed the CAA bill by voice vote. The Senate disagreed with the House version of the bill and requested a conference committee.

Although there were technical differences regarding regulation and important structural differences in the CAA proposed by McCarran and Lea, the House and Senate proponents were largely in agreement. The Conference Committee reconciled differences over the size of the Civil Aviation Authority and the safety board, the role of the administrator, and whether to "grandfather in" old Post Office contracts. The House and Senate conferees split the difference on their disagreements over the structure of the authority and reached unanimous agreement on the legislation.

The disputes between the House and the Senate were minor compared to ongoing struggles with the executive branch. Jealous of their control over air travel, officials from the Post Office, Commerce Department, and Defense Department resisted the efforts to create the CAA. Franklin Roosevelt opposed the creation of the CAA as late as the summer of 1937, believing instead that airline authority should remain with the Interstate Commerce Commission. Still, a series of fact-finding hearings convinced President Roosevelt that greater regulation was needed. In a January 1938 meeting at the White House, Roosevelt told McCarran and Lea he would support the creation of the authority. Roosevelt signed the CAA on June 23, 1938.

EXPERIENCE UNDER THE CIVIL AERONAUTICS ACT

In 1940 Roosevelt's administration reorganized the Civil Aeronautics Authority and the Air Safety Board. The reorganization returned some of the functions of the original CAA to the Department of Commerce—as Roosevelt had wished prior to the act's passage—transferring the remaining powers, including economic regulation, postal contracts, and safety regulations to the newly-created Civil Aeronautics Board (CAB).

The consensus surrounding the act and the reorganized CAB forged a remarkably stable political alliance. The CAA and the CAB constituted a formidable political "subsystem." creating a mutually beneficial alliance between the CAB, the airline industry, and key congressional committees and subcommittees. The stability of this subsystem proved to be a primary impediment to the creation of the Federal Aviation Administration (FAA). Just as the opposition of turf-conscious executive departments originally slowed passage of the CAA, congressional proponents of the Federal Aviation Act in 1958 faced opposition from the CAB, as well as its defenders in the airline industry and Congress.

Despite its unique political coalition of support, the CAA's "subsystem" grew weaker after 1950. When the Federal Aviation Act was passed in 1958, the CAB was both reconstituted and restructured. In reconstituting the CAB, the Federal Aviation Act allowed for the CAB to continue regulating the commercial practices of the airline industry, regulating fares, and conducting accident investigations, but the newly created FAA assumed the CAB's function of regulating the safety of air travel. When Congress created the Department of Transportation (DOT) in 1967, the CAB's responsibility to investigate airline accidents was transferred to the National Transportation Safety Board (NTSB). This left commercial deregulation as the primary function of the CAB. Congress's Airline Deregulation Act of 1978 deregulated the commercial aspects of the airline industry, and spelled the eventual demise of the CAB. In 1985 the CAB ceased to exist under the authority of the Civil Aeronautics Boards Sunset Act of 1984.

See also: FEDERAL AVIATION ACT; NATIONAL AERONAUTICS AND SPACE ACT.

BIBLIOGRAPHY

Brown, Anthony E. The Politics of Airline Deregulation. Knoxville: University of Tennessee Press, 1987.

Caves, Richard E. Air Transport and Its Regulators: An Industry Study. Cambridge: Harvard University Press, 1962.

Redford, Emmette S. Democracy in the Administrative State. New York: Oxford University Press, 1969.

Smith, Henry Ladd. Airways: The History of Commercial Aviation in the United States, reprint ed. Washington, DC: Smithsonian Institution Press, 1991.

INTERNET RESOURCES

Federal Aviation Administration. <http://www.faa.gov>.

CIVIL AERONAUTICS BOARD

CIVIL AERONAUTICS BOARD (CAB) was established by Congress through the Civil Aeronautics Act of 1938. By the mid-1930s, the federal government had begun comprehensive economic regulation of banking, rail, trucking, intercity bus, and other industries. This trend reflected a general loss of confidence in free markets during the Great Depression. One core objective of this new wave of regulation was to restrict or even eliminate competition. The CAB and other agencies were expected to eliminate "destructive competition," a term describing a theory that held that unrestricted entry of new firms and unregulated competition could force prices to remain at or below costs, thus denying sufficient profit to survive and operate safely. Passenger travel by air was just beginning to be perceived as a viable industry. With war under way in Asia and approaching in Europe, an aviation industry was considered important to national defense, and the CAB was expected to ensure its survival. The CAB controlled market entry, supply, and price. Its board determined who could fly where, how many flights and seats they could offer, and set minimum and maximum fares. Interstate airlines needed certificates identifying the routes a carrier could operate and the type of aircraft and the number of flights permitted by each. New routes or expanded frequencies required CAB approval.

Once carriers acquired authority to operate between two cities, they were obligated to operate a minimum number of flights. Carriers needed CAB approval to abandon unprofitable routes and seldom got it. The "reasonable rate of return" from profitable routes would subsidize service on marginal routes. The CAB also operated a subsidy program to ensure service to cities that were deemed too small to support service. Whenever airlines got into financial trouble, the CAB arranged mergers with healthier airlines.

Regulated stability had its costs. Airlines could not respond quickly to changes in demand. As in other regulated industries, wages were high and supply exceeded demand. Airlines chronically operated with 40 percent of their seats empty. The protected environment kept prices high, which limited flying to the affluent few. This structure was first challenged under President Gerald R. Ford and was dismantled by President Jimmy Carter in the Airline Deregulation Act of 1978. After the 1978 act, most CAB functions ceased; others were transferred to the Department of Transportation and the Federal Aviation Administration. The CAB closed its doors in 1985.

BIBLIOGRAPHY

Burkhardt, Robert. CAB: The Civil Aeronautics Board. Dulles International Airport, Va.: Green Hills Publishing.

Douglas, George W., and James C. Miller III. Economic Regulation of Domestic Air Transport: Theory and Policy. Washington, D.C.: Brookings Institution, 1974.

Jordan, William A. Airline Regulation in America: Effects and Imperfections. Baltimore: Johns Hopkins University Press, 1970.

McMullen, B. Starr. Profits and the Cost of Capital to the U.S. Trunk Airline Industry under CAB Regulation. New York: Garland, 1993.

BobMatthews

See alsoAir Transportation and Travel .

CIVIL AERONAUTICS ACT

CIVIL AERONAUTICS ACT. The Lea-McCarren Civil Aeronautics Act of 1938 created the Civil Aeronautics Administration (CAA). Its five members, appointed by the president, had jurisdiction over aviation and combined the authority formerly exercised by the Bureau of Commercial Aviation, the Post Office Department, and the Interstate Commerce Commission. The CAA regulated passenger, freight, and mail rates and schedules, promulgated safety regulations, supervised the financial arrangements of airline companies, passed on all mergers and agreements between companies, and governed a safety board of five members, known as the Civil Aeronautics Board (CAB). In 1958 the CAA, the safety regulation function of the CAB, and the Airways Modernization Board were combined into the Federal Aviation Agency (Federal Aviation Administration since 1966).

BIBLIOGRAPHY

Komons, Nick A. Bonfires to Beacons: Federal Civil Aviation Policy Under the Air Commerce Act, 1926–1938. Washington, D.C.: U.S. Government Printing Office, 1978.

Alvin F.Harlow/c. w.

See alsoCivil Aeronautics Board ; Federal Aviation Administration .