Wanderlust World Wanderlust World According to the U.S. Government's Centennial of Flight website, low-cost airlines formed after The Airline Deregulation Act of 1978 removed costly regulators from the airline industry. By eliminating oversight from the Civil Aeronautics Board and allowing air carriers to set their own routes, services and prices, the act cleared the way for development of budget-priced airlines.
The introduction of low-priced airlines drove average ticket fares down by more than a third, according to the Centennial of Flight website. In addition, budget carriers often serve smaller markets that large airlines find too costly to enter.
Although low-cost airlines serve smaller markets, the costlier regional airports eat into airline profits; to compensate, low-cost airlines often impose fees on services that larger companies offer for free. In addition, low-cost airlines like Allegiant Air may limit their services to smaller markets while avoiding large competitive cities like Atlanta, Houston and Chicago.