Congress Centralizes Regulation of U.S. Commercial Air Traffic Summary

  • Last updated on November 10, 2022

The Civil Aeronautics Act of 1938 brought organized regulation of the domestic civil aviation industry and presaged the development of the Civil Aeronautics Board in 1940 and the Federal Aviation Administration in 1958.

Summary of Event

Several landmark regulatory efforts helped to shape commercial aviation in the United States. First, the Air Mail Act of 1925 Air Mail Act (1925) relieved the government from the responsibility of carrying airmail and allowed contracts to be given to commercial airlines through competitive bidding. Second, the Air Commerce Act of 1926 Air Commerce Act (1926) placed responsibility for the development of the airways, aids to navigation, and safety regulation squarely with the federal government. The Federal Aviation Administration Federal Aviation Administration had its roots in the Air Commerce Act of 1926. Third, the Civil Aeronautics Act of 1938 laid foundations for centralized federal control. The act came to subject commercial air transportation to regulation of entry and exit from the industry, routes, and fares. [kw]Congress Centralizes Regulation of U.S. Commercial Air Traffic (June 30, 1940) [kw]Regulation of U.S. Commercial Air Traffic, Congress Centralizes (June 30, 1940) [kw]U.S. Commercial Air Traffic, Congress Centralizes Regulation of (June 30, 1940) [kw]Commercial Air Traffic, Congress Centralizes Regulation of U.S. (June 30, 1940) [kw]Air Traffic, Congress Centralizes Regulation of U.S. Commercial (June 30, 1940) [kw]Traffic, Congress Centralizes Regulation of U.S. Commercial Air (June 30, 1940) Aviation;regulation Civil Aeronautics Board Civil Aeronautics Act (1938) McCarran-Lea Act (1938)[Maccarran Lea Act] [g]United States;June 30, 1940: Congress Centralizes Regulation of U.S. Commercial Air Traffic[10230] [c]Space and aviation;June 30, 1940: Congress Centralizes Regulation of U.S. Commercial Air Traffic[10230] [c]Transportation;June 30, 1940: Congress Centralizes Regulation of U.S. Commercial Air Traffic[10230] [c]Trade and commerce;June 30, 1940: Congress Centralizes Regulation of U.S. Commercial Air Traffic[10230] Lea, Clarence Frederick McCarran, Patrick Anthony Roosevelt, Franklin D.

By the mid-1930’s, the growth of airmail and air passenger operations had firmly established the U.S. airline industry. After the disastrous years of the Great Depression, aircraft manufacturers began providing more aircraft to airlines for air passenger service. The advent of World War II put even greater emphasis on the development of military and eventually commercial aviation. Progress and acceptance of new technology were substantial, and the future appeared bright for the industry.

As motor carriers’ popularity and dominant positions as movers of domestic passengers grew, comparisons between the nation’s airways and railroads began to be made. Because both railroads and major carriers had been substantially regulated by the mid-1930’s, some thought was given to the potential for regulation of the domestic airline industry. Economic regulation, furthermore, was precipitated by uneconomic duplications of routes or substantial signs of exercise of market power. The Interstate Commerce Commission regulated railroads and motor carriers, but airlines were judged to be in a substantially different industry from their surface-oriented counterparts.

Airlines approached the federal government to suggest working out a basic set of guiding principles, and the fact that the legislation was initiated by the airlines rather than by the government made it unique. The Air Mail Act of 1934 had created three agencies that overlapped in authority, bringing confusion and hardship for the airlines. After several months of study by industry leaders and government officials, a completely new and all-encompassing law was passed affecting civil aviation in the United States. The new law found its base in Article 1, section 8 of the U.S. Constitution, the same foundation used for the Interstate Commerce Act of 1887 and the Motor Carrier Act of 1935. The Civil Aeronautics Act was introduced into Congress by Senator Patrick Anthony McCarran and Congressman Clarence Frederick Lea and was passed by Congress on June 23, 1938.

The Civil Aeronautics Act (also known as the McCarran-Lea Act) amended or repealed all major previous legislation related to aviation, and in doing so it prepared the setting for regulation of a growing industry. Air transportation was judged to be substantially different from previously regulated forms of surface transportation. Issues of competition, monopoly, public service, passenger focus, and safety were all in the minds of regulators. This law and its counterparts for surface transportation found their basis in the industry’s public-service nature. Government officials believed that they should regulate industries or organizations that were concerned with the public interest and were important to the economy. Public-service regulations were destined to ensure that rates charged were equitable, services offered were reasonable and nondiscriminatory, and the public interest was protected.

The 1938 act was in many ways more advanced than the industry it was designed to serve, as it was based on regulatory provisions of the Interstate Commerce Act that had proved effective. Many provisions in the 1938 act were taken almost verbatim from the Interstate Commerce Act. Other provisions were refined to reflect the half century of experience with the regulation of rail transportation. The mechanics of the Civil Aeronautics Act were based on the argument that regulation of air transportation, both economic and safety aspects, should be administered by three separate agencies. The original three agencies were the Civil Aeronautics Authority (CAA), composed of five members who were to establish policies for regulation of safety and economics, an administrator of aviation appointed to carry out the CAA’s safety policies and economic regulations, and an air safety board, which was formed as an independent group of three persons responsible for the investigation of aircraft accidents.

At first, the three agencies’ jurisdictions overlapped, and adjustments had to be made to the authority structures. In April and June of 1940, President Franklin D. Roosevelt proposed changes that became effective on June 30, 1940. The organizational changes, known as the 1940 amendments to the Civil Aeronautics Act, led to the reorganization of the three agencies into two. The first agency, the Civil Aeronautics Board (CAB), was set up as an independent group of five persons who reported to the president. This board exercised legislative and judicial authority over civil aviation as well as executive control of the economic regulations that governed airmail carriers. The investigation of aircraft accidents also became the responsibility of the CAB. The second agency created by the 1940 amendments was the Civil Aeronautics Administration, Civil Aeronautics Administration headed by an administrator who would focus on the execution of safety regulations. The Civil Aeronautics Administration was placed under the Department of Commerce.

The Roosevelt plans submitted to Congress in 1940 led to reorganization in which the five-member Civil Aeronautics Authority became the independent CAB; the Office of the Administrator of Civil Aeronautics was renamed the Civil Aeronautics Administration and placed under the Department of Commerce, wholly separate from the CAB; the three-person air safety board was abolished, with its procedures and personnel absorbed into a bureau of safety within the CAB. The CAB, however, retained the responsibility for prescribing safety regulation and suspending or revoking certain aircraft or airmen certificates. The president’s belief was that reorganization would reduce the number of administrative agencies and simplify the task of executive management while drawing a more practical separation between the functions of the administrator and the functions of the CAB.


The CAB had specific definitions and interpretations of regulations unique to the air transport field. Although there were parallels to surface transportation in economic regulation, safety regulation was much different. In the decades following World War II, there was a tremendous increase in the speed of aircraft and rapid growth in the number of daily flights. These factors, coupled with the increasing inadequacy of aviation navigation facilities, created serious congestion and danger. The problem was graphically illustrated in May, 1958, by the collision of a military jet trainer and a civilian transport plane, the third major disaster in less than four months. The worst civil aviation tragedy in the nation’s history to that date occurred in 1956, when two airliners collided over the Grand Canyon, with a combined loss of 128 lives.The mounting number of air accidents gave rise to the demand for a single aviation agency to conduct the operation and development of aviation facilities and services related to air traffic control.

The Federal Aviation Act of 1958 Federal Aviation Act (1958) brought no major changes to economic regulations, but it did establish the Federal Aviation Agency, which was directed by a civilian administrator. This agency in effect replaced the Civil Aeronautics Administration, which had previously been charged with safety regulation. The administrator was given the power to regulate the use of navigable air space, to establish and operate air navigation facilities, to prescribe air traffic rules for all aircraft, to conduct research and development, and to suspend or revoke safety certificates, subject to review by the CAB. In addition, the administrator retained all authority previously granted to the Civil Aeronautics Administration.

The 1958 act also created the federal government’s policy toward several aviation-related issues. The CAB was to encourage and develop an air transportation system properly adapted to the present and future needs of the foreign and domestic commerce of the United States, the postal service, and national defense. Air transportation was to be regulated in a manner that would recognize and preserve its inherent advantages, assure the highest degree of safety, and foster sound economic conditions. Economic regulation would include the promotion of adequate, economical, and efficient service by air carriers at reasonable charges, without unjust discrimination, undue preferences and advantages, or unfair or destructive competitive practices. Competition would be encouraged to the extent necessary to ensure the sound development of an air transportation system that would serve the public interest. Finally, federal policy would promote safety in air commerce as well as promoting, encouraging, and developing civil aeronautics.

On October 15, 1966, Congress created the Department of Transportation. The department became operational in April, 1967, and the Federal Aviation Agency was placed in the new department, with its name changed to the Federal Aviation Administration. The act also transferred the CAB’s accident investigation and related safety functions to the Department of Transportation and delegated them to an independent agency, the National Transportation Safety Board. National Transportation Safety Board In all other respects, the CAB’s function remained unchanged.

Airlines continued to grow and prosper. The airlines’ share of domestic intercity common carrier passenger miles rose from less than 1 percent in 1930 to more than 77 percent in 1974. U.S. airlines carried 94 percent of overseas travelers in 1974, and airlines also became carriers of diverse types of freight. In 1974, air-freight revenues totaled more than $1.2 billion, which amounted to about 9 percent of air carrier revenues and more than 1 percent of freight revenues for all modes of transport.

Regulation consistently focused on industry development. The acts passed in the middle of the twentieth century proved that the federal government was paying close attention to the stabilization and organization of the commercial aviation industry and to the regulations that ensured its operation and safety. Existing U.S.-based carriers continued to enjoy protection in market share and stability through careful regulatory activities, and it was not until the late 1970’s and the 1980’s that the industry turned its attention to deregulation and a return to free-market control.

The efficacy of deregulation was vigorously debated. Many argued that the new freedoms given to aviation departed substantially from the direction of early economic regulation and made it difficult for the domestic system to operate effectively. Although safety issues were not deregulated, they were affected by increased competitive pressures in the commercial aviation industry. Debates will likely continue on deregulation and on the efficacy of economic regulatory tools. Lending further urgency to the debate over airline safety were attacks by hijackers and terrorists during the last three decades of the twentieth century and the beginning of the twenty-first century, highlighted most dramatically by terrorists’ use of airplanes to hit the World Trade Center’s twin towers in New York City and the Pentagon in Washington, D.C., on September 11, 2001. Outrage over these attacks and fears of more attempts prompted the tightening of airport security and the bulletproofing of cockpit doors; cockpit crews were issued weapons, and the deployment of air marshals on airplanes increased. In the wake of the 2001 attacks, Congress also established the Transportation Security Administration, which succeeded the FAA as the primary agency responsible for security in civil aviation. Aviation;regulation Civil Aeronautics Board Civil Aeronautics Act (1938) McCarran-Lea Act (1938)[Maccarran Lea Act]

Further Reading
  • citation-type="booksimple"

    xlink:type="simple">Davis, Grant M. Transportation Regulation: A Pragmatic Assessment. Danville, Ill.: Interstate Printers and Publishers, 1976. Discusses various pieces of regulation concerning various transportation industries.
  • citation-type="booksimple"

    xlink:type="simple">Harper, Donald V. Transportation: Users, Carriers, Government. 2d ed. Englewood Cliffs, N.J.: Prentice-Hall, 1982. Discusses the interactions among the users and providers of transportation services as well as government involvement in the transportation industries.
  • citation-type="booksimple"

    xlink:type="simple">Hazard, John L. Transportation: Management, Economics, Policy. Cambridge, Md.: Cornell Maritime Press, 1977. A good foundation for the economics of transportation, with references to regulatory actions. Specific sections deal with aviation regulation.
  • citation-type="booksimple"

    xlink:type="simple">Kane, Robert M. Air Transportation. 14th ed. Dubuque, Iowa: Kendall/Hunt, 2002. Undergraduate textbook provides a section on history that includes excellent coverage of the early airmail days and the Kelly Act’s ramifications. Material on subsequent aviation legislation nicely supplements earlier coverage.
  • citation-type="booksimple"

    xlink:type="simple">Wells, Alexander T., and John G. Wensveen. Air Transportation: A Management Perspective. 5th ed. Monterey, Calif.: Brooks/Cole, 2003. Textbook aimed at undergraduates includes a brief but thorough discussion of contract airmail service and the original twelve contract airmail routes.

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