Exam 3: Transportation Regulation and Public Policy

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One facet of national policy development that is often overlooked in the study of transportation is the role of industry associations in shaping national,state,and local promotion,regulation,and policy.These associations exist in most industries and their focus is to lobby Congress and other influential groups in the government to pass laws that will help their members.
These associations are nonprofit entities that derive their powers and resources from member firms.They act on the charges given to them by their members.In transportation,the railroads in the Association of American railroads (AAR)and the motor carriers in the American Trucking Associations (ATA)often meet to resolve matters of equipment uniformity and loss and damage prevention.On the policy side,these associations develop legislative and administrative ruling concepts that favor the collective membership,or they serve as a united front against proposals that are perceived to be harmful to the group.

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The domestic air system receives the benefits of several government programs.Foremost is the Federal Aviation Administration's (FAA)air traffic control system.This system provides navigation and safety for every aircraft in flight within the United States.The system assesses no direct fee to the airlines for its use and captures its operating expenses from airlines and passengers through user charges.
Another direct airline benefit is the subsidy program.These subsidies generally apply to short and medium non-jet flights to cities that are unable to support high traffic volumes.The subsidy has been a significant support mechanism for regional airlines.In recent years,the growth of commuter airlines has enabled regional airlines to discontinue service to small cities.The Air Deregulation Act of 1978 accelerated this trend,which resulted in a lessened need for regional airline subsidies.
The U.S.Postal Service also provides substantial support to airlines.The prime source of income for airlines during their early years came from this subsidy program.In recent years,mail income has not been as significant,but this subsidy is a major revenue source for the industry.
State and local agencies help promote the airline industry through air terminal development and construction.Terminals represent substantial capital investments and would be difficult for the industry to finance and construct.State and local agencies are able to raise the necessary construction funds at reasonable municipal bond interest rates,often backed by the taxing power of the community.The airlines then rent terminal and hangar facilities and pay landing fees for each flight.
Many aircraft safety matters are handled by the federal government.The FAA provides aircraft construction and safety rules as well as pilot certification.In another capacity,the National Transportation Safety Board (NTSB)investigates accidents so that others might be avoided or reduced through aircraft specifications or flight procedures.
Another indirect form of promotion to the airline industry comes from the military.Defense contracts for military aircraft development often provide direct benefits to commercial aviation in the form of mechanical or navigational aircraft improvements.Without military-related research and development activity,advancements in this area would take place at a slower place and at a higher cost to the private sector.
A last form of airline promotion,which is not found in the U.S.system,is direct government ownership,operation,or subsidy of air service.This is common with foreign airlines that serve the United States.In these instances,African,Asian,Latin American,and many European airlines are subsidized so the countries can operate their airlines for purposes of national defense,have some degree of control over traffic to and from their nations,and gain balance of payment benefits and hard currencies through ticket revenues.