You can read the original NY Times editorial here.
THIRTY years ago this fall, Congress passed the Airline Deregulation Act of 1978. Since then, America’s airline system has greatly deteriorated.
Our airlines, once world leaders, are now laggards in every category, including fleet age, service quality and international reputation. Fewer and fewer flights are on time. Airport congestion has become a staple of late-night comedy shows. An ever higher percentage of bags are lost or sent to the wrong airports. Last-minute seats are harder and harder to find. Passenger complaints have skyrocketed. Airline service, by any standard, has become unacceptable.
Consolidation will not resolve the woes of individual carriers, nor will it fix the nation’s aviation problems. Delta and Northwest agreed to a merger last week, and that deal is likely to be followed by other proposals. But the case for mergers is unpersuasive. Mergers will not lower fuel prices. They will not increase economies of scale for already sizable major airlines. They will create very large costs related to consolidation. And they will anger airline employees, who will perceive themselves to be hurt by the mergers.
Although the system could conceivably be operated by a single efficient carrier, consumers clearly benefit from the existence of multiple airlines. The absence of competition never fosters better customer service.
Market-based approaches alone have not and will not produce the aviation system our country needs. We do not need to return to the over-regulation of the past, but some government intervention is required. The objectives of a national aviation policy should be to enable people to move easily from one place to another, to assure safe, courteous and on-time service for consumers, and to improve the financial performance and international competitiveness of America’s airlines.
[EDIT: We could not have said it better.]
The first steps toward achieving these goals should be to improve our outdated air traffic control system, to build much-needed new runways and airport facilities, and to lower the heavy taxes and fees now imposed on airlines and their customers.
Today, aircraft movements are constrained by a radar-based air traffic control system that locks aircraft into predetermined, often crowded routes and that gives pilots little information about the locations of other planes. The system worsens congestion in the air and on the ground.
A new air traffic control system, based on the use of the global positioning system, is in the works. It will reduce costs and congestion by providing pilots with information about other planes, freeing them to choose optimal routes. Unfortunately, Congress has not provided the money to put the new system in place as quickly as possible.
Until the new system is in place, the number of flights at major airports needs to be reduced. Right now, airlines schedule more flights than the runways, terminals and air traffic control system can accommodate. Airlines cannot unilaterally reduce flights because doing so would grant other airlines a competitive advantage. In the short term, the only solution is a government mandate that limits flights to the number the system can handle. To create capacity for future demand, we need to build more aviation facilities, including high-speed rail systems that would encourage the use of airports that are farther away from the cities they serve.
[EDIT: Smaller gauge aircraft have greatly contributed to this problem.]
The financial standards for new airlines also need to be made more stringent. In the years since deregulation, nearly 200 airlines have come and gone. These inadequately financed carriers – whose principal goal has often seemed to be merely to exist long enough to reap the rewards of an initial public offering – have consistently cut prices to attract passengers. This downward pressure on prices has hurt airlines that seek long-term success.
We should also revisit the basis on which we negotiate international aviation agreements. Since the 1980s, our government has too often agreed to “consumer friendly” pacts whose sole apparent purpose has been to try to lower prices for travelers. Because the United States has long been the world’s largest aviation market, these agreements have provided more opportunities for expansion to foreign airlines than to our own, with predictable consequences.
[EDIT: The goal should be to provide the framework for a viable global transportation system worked by United States carriers and employees for the benefit of United States citizens. One reason for tilting the competitive landscape toward foreign carriers is for the eventual replacement of United States carriers and employees, as has been the case in most other modern trade accords.]
Given the recent concerns about aircraft safety, offshore maintenance of American aircraft should be prohibited. Maintenance performed in the United States is done under more demanding rules and a far higher level of Federal Aviation Administration oversight than work done abroad. Keeping the work here would enhance any safety improvements that result from the Transportation Department’s new plan to overhaul its oversight procedures. Moreover, bringing aircraft maintenance work back to the United States will re-create many thousands of skilled jobs.
[EDIT: See “Flying Cheaper,” by PBS FRONTLINE]
Fees and taxes can be as much as 50 percent of the purchase price of an airline ticket and typically amount to about 15 percent, according to a study done by the Massachusetts Institute of Technology and Daniel Webster College in Nashua, N.H. Reducing these charges would make it easier for the carriers to recapture their costs without pricing travel beyond the reach of many customers.
Finally, we need to restore balance to the relationship between management and labor in the airline industry. Revising our bankruptcy laws to prevent failed airlines from continuing to operate would focus management and labor on the virtues of cooperation rather than confrontation. Similarly, binding arbitration of labor disputes would encourage both sides to avoid unreasonable positions and would free the nation’s transportation system from the threat of work stoppages.
[EDIT: This is the only paragraph, of this otherwise welcome editorial, where we disagree with Mr. Crandall. While we agree that balance must be restored, the current “balance” has been heavily tilted toward airline management over the course of deregulation. We agree that bankruptcy should have more negative consequences, rather than just being an opportunity to underprice healthy, solvent airlines, while managment loots employee pensions and contracts and makes off with millions of dollars in bonuses and stock ownership. Binding arbitration has been a goal of management for decades, since they know that they will be able to stack the deck in their favor, while labor will be even more helpless to defend themselves. Managment must be forced to negotiate in good faith as contracts expire. This is no different than the way they secure the other necessary components of the airline business. If the airlines are highly profitable, management should be rewarded proportionately. If not, they should be replaced. Fear of “work stoppages” should not be the primary motivation for fixing labor relations in the industry; fear of a catastrophic failure borne of three decades of abuse, neglect, and managerial/government collusion should be. If the ATA ever gets mandatory binding arbitration, your career is over. Management will then have the tools to fully outsource to underexperienced and foreign pilot labor.]
We need to be realistic: whether there are mergers or not, airline fares are going to increase. Every business must charge enough to cover its operating and capital costs. Regulatory and oversight changes intended to make our carriers more successful may well force prices up faster than would otherwise be the case. But we will be better off with higher fares and more competitors than with higher fares and fewer competitors.
The enormous economic importance of our once peerless aviation system is indisputable. Adding some sensible regulations and making the investments needed to give our airlines opportunities for success would be a far better way to safeguard that economic contribution than further airline consolidation.
Robert Crandall, the chief executive of American Airlines from 1985 to 1998, is the chief executive of an air taxi startup.
Despite sharing many of our goals, Robert Crandall is not a member of OPERATION ORANGE.