Airline Re-Regulation?

jyl · jyl's Garage

In the US, the airline industry was deregulated in 1978. Well, it still remains a highly regulated industry as far as safety goes, but routes, fares, frequencies, etc were deregulated.

In the following 20 years, fares declined about 30% in real (inflation-adjusted) dollars. Passenger counts grew rapidly and Americans fly far more today than before. Service levels have declined markedly. Scores of new airlines were formed and mostly went out of business, and scores of existing airlines went out of business. The airline industry lost money during this period, and airline employees have generally seen their wages and pensions decline.

Question for you all - are there aspects of the airline industry that you would like to see RE-regulated? It doesn't have to be the same aspects that were regulated before. In other words, if you were a Congressman working on airline industry laws, what would you do?

lendaddy · 06-20-2007, 10:14 AM

Shoot myself.

Porsche-O-Phile · Porsche-O-Phile's Garage

Less is more.

Superman · 06-20-2007, 10:31 AM

The airline industry appears to be a "race to the bottom." Apparently, there's money to be made by managing a business into bankruptcy. And so....judges award failing airlines for this behavior by forgiving their pension commitments. So....the only causalties are the taxpayer and the airline employee. $10 per hour is plenty of money to pay someone who repairs and maintains passenger aircraft, right?

lendaddy · 06-20-2007, 10:38 AM

Have you seen an increase in accidents Sup?

stevepaa · 06-20-2007, 10:50 AM

Make the playing field level. New airlines like Jet Blue got sweet heart terminal/gate deals at JFK.

Side note
Before deregulation major airlines employed many engineers in 60's and early 70's in the early days of new jets. The engineers were responsible for designing crack repairs, analyzing component failures, etc.

After deregulation, they could not afford to keep all those engineers and I was expecting significant component failures and down time for planes. However, the quality of the new jets improved as Boeing, Pratt-Whitney, etc learned from all the feedback from the airlines in the 60's.

legion · 06-20-2007, 10:53 AM

Further Steve, does Boeing not accept samples of failed components to analyze themselves? The airlines may no longer do it, but I'd be very surprised if Boeing doesn't.

lendaddy · 06-20-2007, 10:54 AM

Any problems will work themselves out. We don't need useless government lackies trying to fix it.

Tim Hancock · 06-20-2007, 11:03 AM

Rising fuel costs coupled with relatively low fares makes life tough for the airlines. If one company tries to raise fares, other companies get the business instead. I don't know (or really care) what the answer is, but it sure is nice to be able to fly the airlines for often lower prices than they were 15 years ago.

Competition, supply and demand will ultimately determine who survives and who does not. If the unions would all die off (just for Supe), it would help lower costs, but eventually, rates will just have to go higher.

Overpaid Slacker · 06-20-2007, 11:22 AM

JetBlue got "sweetheart" JFK gates by promising to serve upstate NY. Prior to its arrival in Syracuse, for example, USAir had a hammerlock on Hancock Int'l Airport, and fares were extortionate as a result.

Chuck Schumer essentially told JetBlue that if they wanted JFK gates, they had to open Syr-NYC routes. The sole redeeming action ever taken by that shytbag, caused me to dance a jig when my price to fly home was cut by 2/3.

JP

red-beard · red-beard's Garage

It depends, if you are a consumer, why would you want ticket prices to go up 30%. If you work for and Airline, or own airline stock, sure, 30% increase in ticket prices would be great.

Superman · 06-20-2007, 11:47 AM

Thanks, Tim.

JP's story must be false. It's an instance of a private company gouging customers. Since Len expects everything will be fine as long as gubmit has no role, this gouging story must be false somehow. Particularly since it includes a gubmit person effecting a solution. Check your story, JP. Can't be true.

No Len. I haven't seen an increase in accidents. 'Rare event' statistics are not for (Baysian, for example) morons like me. Or you. I suspect nobody really knows whether there has been an increase or decrease. But as far as safety is concerned, let's consider the facts. First, in the absence of gubmit regulation, safety becomes purely a financial decision. Fear of paying for an accident balances with desire to invest that money in improvements or profit. The airline industry is immensely capital-intensive. Airlines seem to have no particular aversion to bankruptcy these days. Does that spell out a comfortably secure safety posture to you, Len?

Superman · 06-20-2007, 12:06 PM

Actually.....bottom line......this industry is probably headed for re-regulation. The current deregulation is just a temporary play time for some execs. There is just too much potential for anti-competitive behavior, anti-safety behavior, etc. If this were an industry that did not have national security implications, if it were an industry where there were not high entry barriers and there might be a large number of small players.....or even a niche corner....then it might escape regulation. But it's not. Eventually, the industry will attempt anti-competitive behavior that is OVER THE LINE and folks will know it's time for rein the industry back in. Just a matter of time, really.

And on a related note, I heard a story this morning about an airline that refused to cancel a flight where the toilet was leaking sewage into the passenger compartment. Passengers were told not to eat much, if anything. They were told not to go to the bathroom unless it was absolutely necessary (the one remaining bathroom was not functioning properly) Lots of vomiting. It was an international flight.

Then, recently, there was that story about the flight that sat on the ramp for eight friggin' hours. They would NOT go back to the gate to release some passengers, and they would NOT bring on additional water or food for the humans that were being held in that plane.

So much for the assumption that companies will do the right thing. Len, I have not seen an increase in accidents. I have seen increases in passenger frustration, health risks and profits.

cairns · 06-20-2007, 12:37 PM

Going back to the early days of intense government regulation will only make the current situation worse IMO.

But the current situation is giga complex and is certainly screwed up.

IMO it could use some immediate regulatory help but it should be limited to the greatest degree possible. For instance, there should be stricter regulations in terms of passenger rights/rebookings etc. and requirements for backup systems and aircraft. Keeping people on an airplane for hours on end borders on the criminal- it happened again last night on Air China and today with UAL's computer crash. Unless Congress does something it will continue and grow worse.

Oh and I'd like to see a requlation requiring all members of Congress (and virtually the Government as a whole) fly commercially. (Fat Chance! give up their private jets and mingle with the rest of us??)

DOT needs to revamp it's monitoring systems. Everyone is aware that an on-time departure means hours in a taxi line. Airlines are padding the schedules so much that a former 40 minute flight is now 1.5 hours.

The last new airport built was DIA. No one is building new ones (at least in the US) and expansion is more difficult due to (of course) regulations. And NIMBY neighbors.

Airline management has persisted in an arcane almost ruinous pricing policies. First, Business or last minute passengers are gouged to pay for those who demand a $300 RT coast to coast (or over the Atlantic) airfare. They've made insipid decisions about aircraft purchases, acquisitions and route choices too. Then there are frequent flyer miles- the more frequently you fly the less they're worth. In 1995 I could fly to Australia in first for 75K. Now it takes 200. They started this game and now don't know what to do with it.

But I can't blame airline management (or the government) solely for the current state of affairs. Like the auto industry their legacy union costs are driving many into bankruptcy and they're now cutting corners wherever possible to make $. New pilots suffer so the old ones can doze for dollars. Lifetime pensions get erased due to the previous greed shown by unions and employees. Now it's clear (at least IMO) that unions can't protect employees and their positions vis a vis management have only aggravated the situation and hardened attitudes when cooperation is needed. Pricing employees out of business while raking it off the top does no one any good. Least of all the consumer. Many airline employees are not happy campers now. Who do you think they take it out on?

I suspect flying is going to get worse in the immediate future not better.
But eventually I think the market will shake itself out- there are already numerous low fare business airlines springing up- and the less government intervention the better.

stevepaa · 01:18 PM

"New pilots suffer so the old ones can doze for dollars. Lifetime pensions get erased due to the previous greed shown by unions and employees."

Nice spin on that.

http://www.forbes.com/markets/feeds/afx/2005/05/10/afx2016620.html

It becomes a government subsidy for negligent management.

nota · 06-20-2007, 01:14 PM

ticket prices are all over the map
some fly cheap and some pay 2 to 8 times more for the same class seat on the same flight
IT IS INSANE
try to get a next day cheap seat on any airline
what ever happend to stand by rates???

cairns · 06-20-2007, 01:44 PM

I agree that the overall average ticket airline price is generally lower. That was a big benefit of deregulation. But I suspect the business or last minute traveler hasn't benefited but rather has suffered- by supplementing the incredibly low prices demanded and paid by most travelers. How long this will go on God knows but I'd sure to like see the airlines employ more rational pricing.

BTW here's a summary of a GAO report signaling that reregulation is not the answer:

http://www.gao.gov/htext/d06630.html

Stevepaa I was referring to salaries and the agreements by unions and the airlines to pay newer pilots on a lower scale while protecting the salaries of those with tenure.

IMO the pension costs were agreed by unions and management in happier times (like the big three). They were guaranteed by the government- what could go wrong? Well plenty... They lead to uncompetitive automotive and airline industries and lots of unhappy people. And in the end we the taxpayers may be the ones bailing them out. I thought this was a pretty good summary of the situation:

http://www.anchorrising.com/barnacles/002107.html

Superman · 06-20-2007, 01:48 PM

Actually.....bottom line......this industry is probably headed for re-regulation. The current deregulation is just a temporary play time for some execs. There is just too much potential for anti-competitive behavior, anti-safety behavior, etc. If this were an industry that did not have national security implications, if it were an industry where there were not high entry barriers and there might be a large number of small players.....or even a niche corner....then it might escape regulation. But it's not. Eventually, the industry will attempt anti-competitive behavior that is OVER THE LINE and folks will know it's time for rein the industry back in. Just a matter of time, really.

And on a related note, I heard a story this morning about an airline that refused to cancel a flight where the toilet was leaking sewage into the passenger compartment. Passengers were told not to eat much, if anything. They were told not to go to the bathroom unless it was absolutely necessary (the one remaining bathroom was not functioning properly) Lots of vomiting. It was an international flight.

Then, recently, there was that story about the flight that sat on the ramp for eight friggin' hours. They would NOT go back to the gate to release some passengers, and they would NOT bring on additional water or food for the humans that were being held in that plane.

So much for the assumption that companies will do the right thing. Len, I have not seen an increase in accidents. I have seen increases in passenger frustration, health risks and profits.

cairns · 06-20-2007, 02:01 PM

do agree that there ought to be some regulation- but I trust government much less than industry.

But I think companies will do the right thing because their shareholders and customers will demand it. The airline companies didn't get to where they are today by offering bad service and making bad decisions- and they won't survive if they continue to do so. I feel certain one or more of the legacy carriers will not survive the current shakeout- and that new competitors will spring up to take their place.

At my home airport (IAD) UAL used to have a lock and there was very little choice. Now we have Southwest, Virgin, Air Tran, Maxjet and others- the government didn't do that entreprenuers did. And UAL has been forced to compete.

speeder · 06-20-2007, 05:08 PM

I would need more concrete facts before forming an opinion on airline regulation. Anyone can plainly see that tickets got cheaper and service declined since the '70s, but anyone who studied logic in college knows that just because 2 things happened simultaneously does not mean that one caused the other. Tramp-stamp tattoos did not cause climate change, for instance.

What would have happened to the airline industry if de-regulation had never happened? That's the pertinent question. No way on earth the business would have stayed the same, but how can you quantify it?