Effect of Deregulation on Australia's Commercial Aviation System Essay

This essay examines the impact of the deregulation of the commercial aviation system in Australia. It begins with a brief overview of the Chicago convention and the Airline Deregulation Act of 1978. The essay then explores the effects of deregulation on airline strategies, transportation networks, passenger numbers, and travel agencies. It highlights the cost-cutting strategies adopted by airlines, the economic growth spurred by the industry, and the interdependence of different transportation networks. The essay also discusses the increase in passenger numbers, changes in airport infrastructure, and the evolving roles of travel agencies. The work emphasizes the importance of the aviation industry in Australia's economic growth and global connections, concluding with a summary of the changes brought about by deregulation, including cost-efficient strategies, improvements to transportation networks, and the increased popularity of air travel.

Running Head: ESSAY
ESSAY: AVIATION

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TOPIC: “Effect of deregulation of the commercial aviation system in Australia”
The Chicago convention of 1944 regulates air transport operations internationally.
Under this, the commercial rights of airlines over international routes are looked over by over
10,000 agreements regarding air services that are bilateral in nature (Koo & Lohmann, 2013).
The Airline Deregulation Act of 1978 removed price restrictions and government imposed
entry on so, which in particular affected the careers that served only specific permitted routes.
Studies regarding the aviation deregulation usually deal with its effect on the airline industry
but, the researcher in this work has tried to address the impact of deregulation in Australia, on
other aspects as well. The act gave rise to strong competition between various aeroplane
manufacturers. Most among them had larger aeroplanes, strong governmental support and
were well established. However, after imposing the Deregulation Act many of these big
airline companies fell and some of the new companies rose (Carpenter, 2018). The effect of
deregulation on changed strategies of airlines, all-round transportation networks, the number
of airline passengers and the roles of travel agencies have been discussed in this study.
According to Quiggin (1997), different Australian carriers have been trying to
develop strategies in order to reduce the costs of travelling due to the growing competition in
the market that resulted due to the deregulation of airlines. Low cost of travelling will attract
more passengers to the Airlines which will help them beat their competitors with higher price
in the market. This is the reason why cost-cutting strategies have become an important aspect
of the airline industry. In this process of reducing costs, the most common area or of tackling
costs for airlines has been its labour. The wages of labour has been cut down to an extent for
cost efficiency. Different Strategies for operating cost reduction has been taken up by
Australian Airlines. Fu, Oum & Zhang (2010) opined fuel hedging contracts which fix the
cost of fuel for a long time can be proven economically beneficial for the airline companies
during periods of price rise of fuels. Efficient negotiation of airport fees can cut down the
expenses of an airline to a significant extent. Along with these, setting benchmarks and
keeping a proper record of investments and profits every year will help the airline analysed
its success or failure over reducing operational costs. This will guide the airline in the proper
direction.
Growth in the airline industry that had accompanied the Deregulation Act has resulted
in the economic growth of Australia. This economic growth in return had helped the

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government to look into other transportation networks of the continent including the roads,
railways and sea networks (Sabatini, 2017). It was possible to improve the conditions and
efficiency of these transportation networks through the development of the airline industry.
Forsyth (2003) added that the success and development of the airlines have in a way
motivated the development of other transportation networks that needed attention. The wide
spread network of sea and especially rail road also acts beneficially for the airline industry as
these often allow the individuals from remote areas to reach their nearest airports. Baker,
Merkert & Kamruzzaman (2015) stated that the development and improvement of airlines
and other transportation networks (rail, road and sea) are interdependent and mutually
beneficial.
The deregulation of airlines in Australia made a significant effect on the growth of the
industry of airlines on the continent. Due to the introduction of a regulatory environment that
is favourable by the customers, the number of passengers all around the world including
Australia has sharply risen. In average, the number of passengers annually has grown by 46%
for the last ten years (Gillen & Lall, 2018). Deregulation has mostly promoted the increase of
international flights as those have now become less problematic and more accessible for the
passengers. Numerous reports and studies conclude that deregulation efforts have brought
about several economic growths and welfare gains due to the rise in the number of flights
internationally. The reduced cost of travel fare as a result of staying ahead in the competition
due to the regulation had also been an active reason for attracting more and more passengers
in the airline industry. Wu (2016) mentioned many individuals are able to take international
flights due to the reduced cost of the fare which would have otherwise not been possible for
them. Even though this is mainly a strategy to stay ahead of other airline companies, it has
covertly led to an increase in international flights.
Deregulation of airlines has brought about several transformations to the airline
industry and the travel agencies. During the intermediate period of this act, airports made
several changes to fit the requirements. Airports that were large had enough traffic to handle
service levels and that also able to improve and grow. Smaller airports that were supported by
cross subsidisation, on the other hand, suffered from lack of service or poor service (Latrou &
Oretti, 2016). Many Airlines went out of business and the condition of the industry altogether
started to degrade. The demands of comfortable, reliable and passenger-friendly Airlines
started to increase, passengers willing to pay increased fare just to enjoy the comforts they

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had on their early days of air travel. The agencies still remaining in business started to
transform their former roles and systems of transportation to increase the popularity with its
ever-growing passengers.
Aviation today is essentially an element of global society that brings cultures and
people together by transporting over 2 billion passengers worldwide in a year. It creates
economic growth across the world by offering almost around 5.5 million jobs in the airline
industry along with having 32 million jobs being dependent on them (Lumbroso, 2019).
Considering its global importance and connections, Australia is hugely dependent on its
airlines for its economic growth both directly and indirectly. The impact of deregulation of
airlines has resulted in certain changes in it. Airlines in Australia time and again developed
cost-efficient strategies regarding the wages of their labour, improvement of railways,
roadways and sea networks. It has changed the traditional roles played by travel agencies
replacing them with new ones. The concern of airlines are not just transportation but a
significant emphasis is laid on the comfort and interaction in the airlines. The act has also
increased the popularity and accessibility of aeroplanes to people leading to an unending
growth of the industry.

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References
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