Airline Industry Regulation Message to the Congress.

To the Congress of the United States:

As a first step toward our shared goal of a more efficient less burdensome Federal government, I urge the Congress to reduce Federal regulation of the domestic commercial airline industry.

One of my Administration's major goals is to free the American people from the burden of over-regulation. We must look, industry by industry, at what effect regulation has--whether it protects the public interest, or whether it simply blunts the healthy forces of competition, inflates prices, and discourages business innovation. Whenever it seems likely that the free market would better serve the public, we will eliminate government regulation.

This will take time, careful study, and extensive participation by all affected parties. But we can start with domestic commercial aviation, an area where Congress has already led the way toward regulation reform.

The statute which governs this industry has not been fundamentally changed since it was first enacted in 1938. At that time, the aviation industry was in its infancy. Many people believed that, unless the government intervened to set prices and control competition, the industry would never develop in a sensible way.

Since 1938, the industry has grown enormously. The regulatory scheme designed nearly 40 years ago to protect a developing industry is no longer suited to today's mature industry.. Regulation, once designed to serve the interests of the public, now stifles competition. It has discouraged new, innovative air carriers from offering their services and it has denied consumers lower fares where they are possible.

The effect of such regulation has been recently documented. Since 1950 the Civil Aeronautics Board has received approximately 80 applications to enter scheduled trunk service from firms outside the industry. It has granted none.

On February 23, 1977, the General Accounting Office released a report which shows that regulation of domestic airlines has kept air travel costs up. The report concludes that:

--because of Federal regulation, air fares are between 22 and 52% higher than they otherwise would be.

--between 1969 and 1974, Federally regulated airlines in the United States could have operated at lower costs than they did, and travelers could have saved $1.4 billion and $1.8 billion annually.

--travelers' savings would probably have been even higher, since lower fares would encourage greater travel.

I am pleased that Congress has recognized that the outdated airline regulatory scheme must be reformed. During the last Congress, both the Senate and the House of Representatives held extensive hearings on various proposals to reduce government regulation and allow the airlines to compete.

I urge Congress to enact, without delay, regulatory reform of domestic commercial aviation.

The legislation should be directed toward certain specific objectives:

1. To the maximum extent possible, our domestic commercial airline industry should be governed by competitive market forces, not the decisions of a government bureaucracy.

2. We should ease the restrictions which now prevent entry into the industry and into currently protected routes, so that the new, innovative companies can offer their services to the public. A financially responsible firm which meets applicable safety standards should be denied entry only if the Civil Aeronautics Board can show that entry would be detrimental to the public interest.

3. Carriers should be allowed to expand their routes, within limits, without obtaining approval from the Board.

4. After a short, initial phase-in, carriers should be free to set competitive prices, with only such regulation as is necessary to prevent predatory, below-cost pricing.

5. Carriers should be given more flexibility to leave markets without prolonged hearings or onerous restrictions.

6. Small communities must be protected against the loss of needed air service.

It will take time to change from a system of extensive government regulation to one emphasizing the natural forces of the marketplace. As we make this change, we must take care to protect the legitimate interests of the public and of the air industry and its employees.

My Administration will cooperate fully with Congress throughout the legislative process so that legislation can be enacted by summer.

JIMMY CARTER

The White House,

March 4, 1977.