Changes to the Transportation Industry Abstract

This research reviews some of the major acts that have shaped the
transportation industry. Those that are covered include: the Regional
Rail Reorganization Act of 1973, the Airline Deregulation of 1978, the
Trucking Industry Regulatory Reform Act of 1994, the ICC Termination Act
of 1995, and the Ocean Shipping Reform Act of 1998. These acts were
formulated with the aim of deregulating the relevant sectors of the
transport industry. Though some were projected to lead to negative
results, the impacts they have had in the transport industry are
generally positive because they have led to improved efficiency,
competition and profitability among other positive impacts.
Changes to the Transportation Industry
The transportation industry constitutes one of the major sectors that
contribute to the economy. As a result, there have been constant changes
in the policies that govern their management as a way of ensuring that
the industry is streamlined in line with the economic changes and needs.
The transportation industry has been developed and improved steadily
with the aim of ensuring that it serves the public transportation needs
and that it remains profitable. Several acts were developed to support
optimal functioning of the different segments of transportation. While
these acts were enacted at different times and were related to different
transportation industries, they have similarities in that they sought to
deregulate and improve the efficiency of the transportation industry.
Regional Rail Reorganization Act of 1973
According to Bleich (2012), the period between 1967 and 1973 marked a
time when railroads in the northeastern segment were unable to meet
their debts. This led to a petition for reorganization under the
Bankruptcy Act. One of the companies that filed Bankruptcy was Penn
Central and the merge of Pennsylvania, Central and New York railroads
started bankruptcy proceedings. In 1973, it was evident that the
statutory procedures that were there had not been successful in
reorganizing the rail system and could not support the adequate
management of the northeastern rail system which was deteriorating.
Similar challenges also characterized the northwestern region. This led
to threats about cessation of rail services. These circumstances are
what led to the development of the Regional Rail Reorganization Act of
1973. The Act supported the provision of funding for those railroads
that were bankrupt and authorized the formation of the Consolidated Rail
Corporation. This Act brought several changes to the management and
functioning of railroads.
One of the major changes that the Act brought is related to the
restructuring of the rail systems located in the northeastern region.
The Act supported restructuring and planning the railroads so that
regions that were considered unprofitable were abandoned. The Act put
into consideration the economic aspect by supporting abandonment of
railway services that were unprofitable.
The Act also supported the dissemination of $1.5 billion which was used
to support railroads that were bankrupt. This supported the processes of
restructuring and ensured that employees were protected even as the
changes were undertaken and implemented. The changes in the areas of
service provision and the financial support led to the development of a
healthier railway system run by the private sector.
The consolidation of major rail systems and the abandonment of railway
systems that were unprofitable and duplicated ensured that the railway
system in the Northeast survived (Bleich, 2012). It is therefore
significant because it assured the development and improvement of the
railway system rather than a collapse of the same. The act brought
efficiency in the management of the railway system. It ensured that the
running of the system was rationalized and that the levels of
profitability recorded were improved. It was not longer a must for all
areas to have railroads that are functional yet they were not
profitable. It is therefore clear that the Regional Rail Recognition Act
of 1973 marked the starting point for other changes that streamlined the
functioning of the railway system so that it has steadily developed into
what it is today.
Airline Deregulation of 1978
Airline regulation history was marked in 1937 when the Civil Aeronautics
Board stated regulating the functioning of airlines. Some of the aspects
that were regulated included: interstate routing, fares, scheduled of
flights and routes. This means that the airlines had little autonomy in
their functioning. In the early 1970s, the environment started changing
so that there was immense pressure for the rigid system of airline
management to be changed. There was an oil crisis in 1973 and to add to
this, there was stagflation and this made the economic environment
change. To add to this, there were changes that supported technological
advancements. Passengers who were against paying high fares that were
determined by the regulations were unhappy even though the airlines
favored regulation since it meant their profits were guaranteed. The
government felt that this could result to a scenario that was similar to
the one witnessed in the railway system and opted to support
deregulation. It was feared that the expensive nature of airline
transport would push customers away so that airline companies would no
longer be sustainable. Deregulation was therefore significant in
introducing flexibility in operations and ensuring the airlines were
sustainable through client satisfaction and increased use of airline
transport.
The Act Airline Deregulation Act of 1978 had several impacts. One of the
impacts was lowered fares. Airfares are said to have reduced steadily so
that it is more affordable to travel by air than it was before the law
was implemented. According to Robson (1998), twenty years after the
deregulation act the fares were 22% lower than they were before
deregulation had been implemented. The Deregulation Act also led to an
increased number of passengers who were using air to travel. This is
believed to have resulted from reduced fares and diversity in routing.
The deregulation also increased competition and this is related to
routing. According to Robson (1998) twenty years after deregulation, the
number of airlines had increased by about 23 and this increased
people’s options when they wished to travel by air. The increase in
airlines also increased the number of people who got employed and
therefore there was a generally positive impact in the economic realm.
It is clear that airline deregulation opened up paths through which
competition could be introduced and as such, it led to improved services
owing to competition. Airlines had to stay attractive to clients and
this led to improved services. Though there had been projections that
the deregulation act would lead to higher fares and other negative
outcomes, it actually turned out to have positive impacts and led to the
growth of the airline industry (Robson, 1998). There have however been
challenges for the industry especially during harsh economic times
because clients become more sensitive towards fares. There are instances
when airlines have reported loses and some have been rendered bankrupt.
Nevertheless, these are few and many more companies have succeeded to
maintain profitability and improve services amidst the competition
(Robson, 1998).
The Trucking Industry Regulatory Reform Act of 1994
There has been a steady push for improvements in the trucking industry.
Acts that were developed prior to the Trucking Industry Regulatory
Reform Act of 1994 had attempted to improve the way the industry
functioned. For instance, the Motor Carrier Act of 1980 led the industry
to be opened up to new carriers and promoted competition. Similarly, the
Staggers Act of 1994 supported inventory reduction thus improving the
speed at which goods were moved (Long, 1997). Even so, there was need to
streamline other aspects of the industry including the rates,
exemptions, and entry into the industry plus improve those that had been
addressed earlier further. The changes in laws were meant to prevent the
unprofitability and other challenges that had been recorded in the rail
industry. Aspects such as rate restriction, entry restriction, and the
maintenance of transport lines that were unprofitable informed the
decision to deregulate the truck industry. The history of transportation
in other industries and changes that brought improvements, were
perceived as necessary for the truck industry (Long, 1997).
Previously, the tracking companies were required to file carrier tariffs
that were common with the Interstate Commerce Commission (ICC) but this
was eliminated by the Trucking Industry Regulatory Reform Act of 1994.
This meant that the tariffs did not have to be approved by the ICC and
the carriers were at liberty to use tariffs that they developed
themselves. The tariffs covered different aspects including rates rules,
classifications, and the basis on which rates are developed. On a
similar note, the act made it possible for rates to be challenged by the
shipper within 180 days. It is after the 180 days that the rate became
absolute (Long, 1997).
The law diminished the level to which motor carrier licensing was
conducted. Carriers that sought to expand or those that wanted to enter
the industry were required to demonstrate their abilities to comply with
statutory safety requirements as well as those outlined by the ICC and
other regulations. This was contrary to the period prior the act when
new entrants into the tracking industry were limited.
The new act also meant that truckers were required to demonstrate their
ability to comply with safety requirements laid out by the Department of
Transportation (DOT) and their ability to provide insurance that
adequately covered liabilities (Long, 1997). The law also outlined some
exemptions. One of them was that carriers who dealt with motor goods
would still be covered by the law that existed. Second it exempted
carriers dealing in “non-contiguous domestic trade” (Long, 1997).
The law was significant because it supported further deregulation by
introducing less restrictive rules. these affected the development of
the industry in positive ways. One of the most significant outcomes was
the opened up path through which new carriers could join the industry.
New entries had previously been stifled through other regulations but
this law introduced criteria that if met, allowed new carriers to be
allowed to join the industry. There was therefore increased registration
and increased competition in the industry. Moreover, the reduced
regulation of tariffs meant that carriers could compete more. The law
reduced stifling of new carriers (Long, 1997).
The law also led to improved services. It led to improved safety
standards through the introduction of comprehensive compliance rules.
This meant that new entrants could compete and perform at levels that
did not compromise quality. The act therefore opened up the path to a
better managed and more profitable trucking industry (Long, 1997).
ICC Termination Act of 1995
This act aimed to terminate the existence of the Interstate Commerce
Commission (ICC). The ICC was responsible for many regulations that
governed interstate commerce and the main aim of terminating the ICC was
to reduce the level to which unnecessary regulations made interstate
commerce cumbersome. Even so, the termination of the ICC did not
translate to complete termination of its roles because they were
transferred to the Surface Transportation Board (STB). Nevertheless,
this termination eliminated an overlap of roles one of them being
assuring safety and another one being ensuring that carriers in the
tracking industry were compliant with the insurance regulations (Wooley
and Peters, 1995). The bill was not only meant to streamline the
management of trucking but also to support further deregulation in the
sector. It was significant in ensuring the industry grew further and
that efficiency was improved. The economy is said to have improved
tremendously and there was need for competition. This could not be
achieved with extensive regulations on the industry.
Indeed the elimination of the ICC led to further deregulation of the
trucking industry. The deregulation process was now supported basing on
individual cases and this supported more autonomy among trucking
carriers. Prior to the termination, carriers were expected to get the
authority to operate through obtaining brokers’ licenses, permits or
carrier certificates. After the termination, they were only needed to
show that they were compliant with requirements for safety, quality
service provision and insurance from agents that were designated (Wooley
and Peters, 1995).
The law opened up the opportunity for new entrants into the carrier
industry because the levels of deregulation were even much higher than
those which had been enacted when the ICC was still functional. This led
to more competition, improved services and lower rates. The level of
bureaucracy that characterized the carrier industry, and which was
enacted by the ICC was extensively reduced (Wooley and Peters, 1995).
The levels of satisfaction improved because carriers and other parties
were able to negotiate on what was best depending on the situation and
economic circumstances rather than stick to predetermined tariffs. The
act therefore had positive impacts on the carrier industry by improving
efficiency and reducing restrictions.
Ocean Shipping Reform Act of 1998
According to Lewis & Vellenga (2000) prior to the Ocean Shipping Reform
Act of 1998, there had been steady developments in ocean transportation
over a period of two decades. There was a higher level of concentration
on the industry through consolidations and mergers. Moreover, there was
an increased need for shipping that was sophisticated because
manufacturing was characteristically more globalized and this called for
reliability. These developments in the industry called for the
development of law that was in line with the new environment and which
met the shipping and growth needs. According to Lewis & Vellenga (2000),
the act was another way through which the transport industry was being
deregulated even further with specific reference to shipping.
This act was significant because it was a major way through which
exports reached their markets. There was therefore need for more
efficient ocean transportation. Without the desired efficiency, it would
prove difficult for the United States to be as competitive as expected
in the export industry which was steadily growing and developing at that
time (Lewis & Vellenga, 2000). The law had major impacts on the way the
ocean transport industry was managed.
One of the impacts of the law is linked to service contracting. The law
ensured that the service-contracting realm was more competitive and that
clients were better placed to deal with individual carriers. This also
translated to more confidential shipping because services were sought
after and contracted with individual carriers who did not have to go
through conferences that supported rate-setting (Lewis & Vellenga,
2000).
Rate setting was especially a major aspect of regulation and this act
made it possible for shippers to work with rates that were non-binding.
The act therefore paved way for the use of agreements which were based
on the conditions of the market and not static rates that were set
(Lewis & Vellenga, 2000).
The act also affected tariff publication. Initially it was necessary
for tariffs to be published using technology and in print. However, the
act made increased flexibility because carriers were able to enjoy fewer
burdens that were related to compliance with tariff publishing. To add
to this, the law also made it possible for the shipping industry to
guard itself against foreign practices that were predatory in nature
especially in relation to pricing. This ensured that the pricing
conditions favored shipping and that any detectable unfair shipping
practice was addressed (Lewis & Vellenga, 2000).
Last but not least, the law made it possible for licensing and bonding
to be managed better. The act grouped the non-vessel-operating common
carriers (NVOCC) and the ocean freight forwarders under the ocean
transportation intermediary (OTI) and as such, the former were able to
get licenses if they choose to. There was also a requirement for OTIs to
secure bonds. Generally, the act led to higher levels of deregulation
which was meant to secure efficiency and better returns for the ocean
shipping industry. The act set the pace for changes that have aided the
ocean shipping industry to advance steadily over the years.
Conclusion
The acts that have been reviewed in this research have some common
concepts. First, all the acts sought to deregulate the transportation
industry. All sectors of the transport industry were highly regulated in
the past but with imminent changes in the operating and economic
environment, there was need to deregulate them. The first act which is
the Regional Rail Reorganization Act of 1973 seems to have informed all
the other acts that sought to deregulate the transport industry. The
deregulation ensured that all the industries operated more autonomously,
that they became less bureaucratic, more efficient, more competitive,
and that they reported better results than they did in the past. Second,
all the laws yielded positive results and this supports the
generalization that deregulation worked well in making the transport
industry efficient. Though these had been projections about the possible
negative effects of some of the acts, they generally yielded positive
results. These acts paved way for the admirable transport industry that
is currently witnessed.
References
Bleich, L. A. (2012). Regional rail reorganization act of 1973: Was
congress on the right track, St. John’s Law Review, 49, 98 – 138.
Lewis, L. & Vellenga, B. D. (2000). The ocean shipping reform act of
1998. Transportation Journal, 39, 27 – 34.
Long, S. G. (1997). Transport at the Millennium. Thousand Oaks: Sage
Publications, 1997
Robson, E. J. (1998). Airline Deregulation: Twenty years of success and
counting. Retrieved September 28, 2013, from HYPERLINK
“http://www.cato.org/sites/cato.org/files/serials/files/regulation/1998/
4/airline2-98.pdf”
http://www.cato.org/sites/cato.org/files/serials/files/regulation/1998/4
/airline2-98.pdf
Wooley, J. & Peters, G. (1995). Statement of Signing the ICC Termination
Act of 1995. ,The American Presidency Project. Retrieved September 28,
2013, from http://www.presidency.ucsb.edu/ws/?pid=52436#axzz2gBXm1DJm
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