It Starts Here -- Re-Regulation

I’ve got a million things I want to say this morning. I’m been writing blogs in my head since yesterday evening. That’s when I got an email from my friend Joe. That’s how these things start. Some guy named Joe reads something and sends it some guy like me. And now -- before I get carried away with writing all these thoughts in my head -- I going to send you off to read it.

For those that don’t have time at the moment, here are a couple of pertinent excerpts from a 5 page article you need to read.

”All these trends in the airline industry are bound to get much worse, and soon. Despite massive consolidation, steep cuts in wages and benefits, sharply rising fares, huge direct and indirect subsidies, and a slowly recovering economy, the industry remains unable to service its debt, and its executives—now serving at the whim of Wall Street— see no way out except to continue to merge and to cut capacity. U.S. airlines lost money in all but three years between 2001 and 2010, according to the industry’s trade group, for a cumulative net loss of $62.9 billion. Even before the recent bankruptcy of American Airlines, the value of all publicly traded U.S. airline stocks amounted to only $32.3 billion, less than that of Starbucks.”

”Nor can we blame the problem on the effects of the Great Recession. After decades in which the price of energy has risen and fallen and the economy has boomed and busted, the long-term trend is clear. The industry has been in turmoil and decline for more than thirty years, barely able to earn its cost of capital in the best of times and only then by cutting service and quality. It’s now evident that the industry’s problems are structural and deepening, as is the crisis faced by cities and industries that depend now more than ever on frequent, affordable air service to remain competitive in the global economy.”

”A study published in the Journal of the Transportation Research Forum in 2007 confirms that the pattern continued. Except for a period after 9/11, when airlines deeply discounted fares to attract panicked customers, real air prices have fallen more slowly since the elimination of the CAB than before. This contrast becomes even starker if one considers the continuous decline in service quality, with more overbooked planes flying to fewer places, long waits in hub airports, the lost ability to make last-minute changes in itineraries without paying exorbitant fares, and the slow strangulation of heartland cities that don’t happen to be hubs. Moreover, most if not all of the post-deregulation price declines have been due to factors that cannot be repeated, such as the busting of airline unions, the termination of pension plans, the delayed replacement of aging aircraft, the elimination of complimentary meals and checked baggage, and, finally, the diminution of seat sizes and legroom to a point approaching the limits of human endurance.”

For those pressed for time, here’s a blog at The Washington Monthly that sums up the article (which is also at The Washington Monthly .)

Is It Time to Re-Regulate the Airlines?

Here’s the link for the full article.

Terminal Sickness
How a thirty-year-old policy of deregulation is slowly killing America’s airline system—and taking down Cincinnati, Memphis, and St. Louis with it.

As soon as you are sure this article meets with your approval, I want you to share it with everybody you know. That’s how these things happen, somebody like you sends something to somebody like me. I especially want you controllers to send this article to all your FacReps and Legislative Committee members. I’ll have a lot more to say in the coming days. But for right now, READ THIS ARTICLE.

Don Brown
March 14, 2012