Final answer:
The Airline Deregulation Act of 1978 ended government regulation of airline fares and routes, leading to significant industry changes with long-established airlines going bankrupt and new ones emerging in a more competitive environment.
Step-by-step explanation:
The act which ended government controls of airline fares and routes was the Airline Deregulation Act of 1978. This significant legislative change allowed airlines to set their own fares, determine their own routes, and introduced a new era of competition and service within the airline industry.
Prior to deregulation, the Civil Aeronautics Board (CAB) regulated all aspects of the industry, meaning there was little competition and innovation. Following the act, established airlines like Pan American, Eastern, and Braniff went bankrupt, while new carriers like People Express emerged, reflecting the industry's dramatic shift.
The pendulum swung in favor of deregulation due to the realization that government control had stifled market dynamics and competition. Since airlines could not profit solely from passenger fares, government regulation through the Postal Service and later the CAB was intended to maintain the airlines mainly for airmail transportation.
Eventually, deregulation was embraced to foster market competition and eliminate the stagnant landscape that had been present for decades under the regulatory oversight of the CAB.