In 1975, Australia was still living with the "Two Airline Policy." This was a policy, enshrined by Acts of Parliament, but suspect under constitutional constraints, that equally divided the market between a private (Ansett) carrier and a public carrier (Australian National Airlines - ANA). The fiat (cost driven formulas) rate structure on Australian city-pair routes was very high. Import licenses were used to enforce cartel discipline and exclude viable competition.

During this time, the U.S. was wrestling with a similar problem of grandfathering and rate setting under the Civil Aeronautics Act (1935). Concurrent with this, the California Public Utilities Commission (PUC), was experimenting with multi-part and marginal cost pricing for intra- state airlines, especially those operating on the highly travelled SFO-LAX (San Francisco - Los Angeles) city pair route. PSA, the major California carrier, operated only within the state and thus did not fall under CAB jurisdiction. The CPUC appeared to have a more innovative approach in incorporating demand side considerations into rate making determinations.

Clearly, load factors on the LAX-SF corridor were responsive to market pricing. A quantitative investigation of Australian yields indicated that market pricing (elasticities) would increase load factors. Also, an overall economic impact analysis, suggested that deregulation of the Australian Airline Industry would yield positive economic gains to Australia. The California experience, with SFO-LAX the Sydney (SYD)-Melbourne(MLB) analog, in conjunction with the economic efficiency arguments, eventually convinced regulators in Australia (and the US Congress - albeit, the Kennedy- Kelly Act of 1978) that such a transport structure was not in the best interest of an emerging world power. This input was provided to the Australian Department of Transport in 1975 and was considered a pivotal study in stressing the advantages of market pricing under a deregulated industrial construct.