Is Re-Regulation the Answer?

[surfnole]

http://www.pilotswanted.com/newsletters/2002-09.htm

 

[ShawnC]

Umm... yeah...

Southwest, Airtran, and Jetblue seem to be doing pretty well. Times are changing the $2,000 walk-up customers have either went biz jet or are flying Southwest. The major carriers just failed to change with the times.

 

[ifly4food]

I'm in favor of re-regulation. It's the only way the airlines will return to a sensible and profitable business model. As I discussed in the "future of the RJ" thread, the "major" airlines are in for a huge upheaval. It's unlikely they will change their business models without every one of them filing for chapter 11 at some point. The future of aviation is the LCC and it won't be going "from anywhere to everywhere" like the airlines currently try to do. The airlines will begin to drop routes they deem unprofitable like hot potatoes once competition allows this. This will necessitate the government stepping in to reestablish air service on some routes.

The competition model (deregulation) just hasn't worked for airlines. Come to think of it, it hasn't worked for the phone co, electric co, or the cable co either. It has done nothing but reduce choices and raise prices for consumers.

 

[flywithastick]

Capitalism works. The strong survive, and the weak fall aside. Sorry for those who've lost their job, but the business will be better off in the long run.

 

[chawbein]

The government has no place in regulating airline routes. Let the major airlines fall, new ones will just come in and take their place. Flying a jet into Springfield, MO is a colossal waste of money. If there is not enough demand for service, why should the government come in and say "You should supply service"? There is a perfectly good airport 3 hours north of there (MCI) that does have the demand, which will increase with the termination of these non-essential routes.

The airlines and the government do not exist to make sure you have a job.

I know that the idea of flying a bus around the country with 8 legs a day isn't the romantic idea you had about flying for an airline, but that is the future of the business. The only way it will go back to "the good ole days" is if the govt. comes in and supplements the business. That is BS, and I for one refuse to pay for this sort of welfare system.

 

[Draginass]

It depends on what you want to pay for tickets and kind of route structure you want. If you want ultra cheap tickets, then you'll only get large cities and flying into second tier (low cost) airports. The SW model is only valid under limited conditions. JB is doing ok now, but has deferred payments on jets and has not yet had the expenses of heavy checks with their airplanes. Let's see how well JB is doing in a couple of years.

 

[flywithastick]

City size is really irrelevent. Demand is all that factors in. If CoEx, American Eagle and Delta Conn ALL can fly to College Station, Texas (without regulation), then there's hope for every mid-size US town with a moderate amount of business and light industry. Granted, Texas A&M probably drives much of this business, but we're still talking about at least 3 regionals supplying a metro area of 150k.

SWA flys to Corpus Christi and Brownsville. CoEx even flies to Victoria with a pop of ~60K. Sounds pretty convenient to me without regulation. What do you want, jet service to Lipan and Old Dime Box?!

fly4food - "The competition model (deregulation) just hasn't worked for airlines. Come to think of it, it hasn't worked for the phone co, electric co, or the cable co either. It has done nothing but reduce choices and raise prices for consumers."

Say what? Back this up with some sources. The most notable issue with this one in my mind is the way California *supposedly* began electrical power deregulation. What they have is not deregulation. They've dug themselves into the hole they're in. Texas has begun to phase in deregulation and it has done wonders in the industrial scene. Small, more efficient combined cycle plants are popping up all over the state. From a supercritical unit having about a 35% conversion efficiency to a 50+% efficiency for a natual gas fired combined cycle plant is paying off for the consumers and for the concept of fuel conservation. CA doesn't like the NOx or other byproducts from fossil fuels (they don't like nuclear either - but that's another issue), so they've basically prohibited all new plant construction. so how can they grow in population/demand, but still supply their customers with power? They can't - they have to import it. Now, they're a captive market, will pay higher prices and have limited supply thanks to the *restrictions* their state govt has placed on the providers and distributors. This is NOT deregulated.

off my soap box now. wish I could go flying...

 

[Eagleflip]

Interesting...

The competition model (deregulation) just hasn't worked for airlines. Come to think of it, it hasn't worked for the phone co, electric co, or the cable co either. It has done nothing but reduce choices and raise prices for consumers.

Publisher, I respectfully disagree with your position. As my young aviation friend said, the government has no business fiddling with major corporations, with one caveat, e.g. temporarily augmenting their case when the impact of their failure would hurt a great number of folks in the country.

What has degregulation brought the US? Free and cheaper trucking and long-haul freight for one.

Another example? Generic drugs are now available to the masses (in our country and others) instead of the relatively rich few.

To use your examples, deregulation brought multitude of choices for phone plans--Ma Bell's breakup created (after a frenzy of boom/bust businesses) a competitive market where long distance rates are lower (inflation adjusted) than 20 years ago.

Further, the deregulation of the phone market allowed unfettered development of cell phone systems. I don't think this was necessarily a benefit, by the way. With competeting systems unable to access each other's technology, we have not aided the overall development of the cell's potential as has occurred in Finland, for example. Perhaps there is a parallel in aviation here? Hmmm. Anyone? Bueller?

Electric companies? Dunno..I haven't done any research on what that industry has done in past years, other than what state government did to hinder power plant development in California. Ahh--regulation actually hurting the system!

Cable? Yep, you nailed that one. However, cable is quite the labor/material intensive system that does not easily allow for competition, thereby creating a de factor monopoly. There is no parallel with aviation here--the commodity is simply not monopolistic in nature.

Reaching back to the article that led off this thread, I note with alarm how the passengers are depicted by the author. While our average passenger may not be rich or good looking, they do pay for the privilige of being transported from A to B safely. The times of rich folk jetting across the country, with their purported sense of class and polite sensibilities, is long past. We need to get over it.

I guess my point is that while some passengers are indifferent and difficult, they pay our wages and keep us in work. Perhaps they should be treated with respect rather than contempt. Is this article evidence of an industry wide aversion to our passengers? Probably not, but we MUST win the public's confidence back via all methods: value, safety, and service.

If, however, a passenger tries to hand my #1 a dirty diaper, I expect #1 to push it back, smile sweetly and say, "Bless your heart....you just need to drop this in that trash bin over he-ah!"

 

[JayDub]

Hey Draginass

Draginass,

I had dinner with a crashpad roomie about two months ago. He is an AA FO and had just come back from a mgmt. road show that day. The question came up about JB and their deferred payments. This guy (I believe a chief pilot of some sort) said they had dispatched a "team" to look into these claims. He said they could find no evidence of this. He also asked if any one could produce some evidence, they would most interested in seeing it (for possible legal action I would suppose).

Any chance you could look into this for us? I believe you work for AA. If they can't find evidence of it, how much more reliable source would you like?

I believe the road show was held at LGA, but may be wrong. Thank you.


JayDub

 

[CF34-3B1]

JB is doing ok now, but has deferred payments on jets and has not yet had the expenses of heavy checks with their airplanes. Let's see how well JB is doing in a couple of years.

Absolutely 100% untrue.

I had the opportunity to speak to Dave Barger (President) and Al Spain (VP Flight Ops) in a group setting recently. This very topic came up.

Their reply: "We WISH it were true, please tell us who would be willing to give us free airplanes, and we'll gladly take them!"

 

[TXCAP4228]

JBLU

I don't want to divert from the thread, but I thought I'd look into this whole thing about JBLU defering payment for airplanes.

The September 30, 2002 10Q statement filed by JBLU shows:


Ballance Sheet - Current Liabilities
Current maturities of Long Term Debt $51.8 Million.

Operating Expenses
Aircraft Rent $29.85 Million YTD,
Aircraft Rent $10.06 Million in the 3rd quarter.

Consolidate dstatement of Cash Flows
Predelivery Deposits for Flight Equipent $88.4 Million.

It sure looks to me like they are paying for their airplanes, and even putting up significant money for future deliveries. But what do I know? I only read their financial statements.

The notes didn't say anything about payment deferal and they don't show it on the financials. They do have $14.9 Million listed under "Other Accrued Liabilities" but that's not for airplanes.

Interesting reading. You can find the fiancials here.

Re-regulation would be a terrible idea - like using tarrifs to make sure that Ford, GM and Chrysler don't have to compete with Honda. Why should we support companies who don't perform?

 

[chawbein]

The writer of that article needs a MAJOR attitude adjustment. I would like to find out what airline he flies for so that I may NEVER have the opportunity of giving them my hard-earned money.

Why do you think people fly SWA? Because they get a smile from their employees and maybe a joke, not a condescending greeting or a look of disgust.

That guy's attitude explains EXACTLY what is wrong with the "Major" airline industry.

 

[TXCAP4228]

Attitude

Jeez. The author of that article has a serious attitude problem. If anyone know what airlines he flies for I'll be happy never to fly on it again.

Alternatively, if he has the stones to actually make a post here I'd be happy to discuss it with him.

 

[nonstop]

The government already runs this industry. They call practically all the shots, and they tax the sh1t out of the airlines. One of the few variables left, and the largest is the employee cost. So everytime the government adds a new tax or burden, guess to pays for it?

The government needs to regulate it, or get the hell out of the process.

Comparing Jet Blue and Southwest to any major carrier that provides global service is totally unfair. If you think the answer is survival of the fittest, you better be careful what you wish for.

 

[waka]

I'm no MBA but I have to say that this writer's suggestion section is right on for the most part. This practice of a difference of sometimes hundreds of dollars between pax sitting next to each other is ridiculous. In many respects, the airlines act like juvenile banshees. To (at least) this extent, regulation would be prudent.

Unchecked capitalism does not work. The market cannot dictate public policy.

 

[Draginass]

Assuming you believe the company's financial statement . . . .

Aircraft Rent $10.06 Million in the 3rd quarter.

$10 million divided by 3 months = $3.3 million/month divided by 32(?) acft = $103,000 per month for a A320? That's pretty cheap or maybe . . . .

 

[trainerjet]

The code of tribal wisdom says that when you discover you are
riding a dead horse the best strategy is to dismount.

I guess to some, this wisdom is hard to come by.

 

[F9 Driver]

What do you

think the ATSB is?

Propping up the industry in the immediate aftermath on 9/11 was a good idea, but giving out cash to some, but not all airlines IS WRONG!

The ATSB is subsidizing (sp?) some disfunctional carriers and some good ones (like F9 with little regard for long term viability.

Some have given the govt a share (warrents) in their business in return thus guarnteeing they will always be a drain on the tax payer no matter how poor their performance.

How can the govt pull back and say "no more" when all of the cash is gone and the company that we own a share in says that they need more?

Just my .02

 

[ifly4food]

Comment #1: It's interesting to see how the two or so posters who think the author of that article has an attitude problem are not airline pilots.

Comment #2: My remarks about deregulation failing in other industries was an off-the-cuff remark based on what I hear in the news, on NPR talk shows and my own observations. Of course I don't have hard numbers to back up that statement because, frankly, I have better things to do than research every topic lest someone challenges me to an academic debate. Sorry. I guess I should preface every statement with IMO lest anyone takes me seriously, because everything I write here is IMO. I think of it more than an a crew lounge discussion than an academic debate. If you challenge me to an academic debate, I'll lose every time.

Rant Alert:

IMO re-regulation is the answer. It will promote safety(good for the public) by ending the "cut corners" mentality of our airlines. It will return profits to investors (good for the economy) by forcing airlines to sell their product for what its worth. It will improve labor relations by relieving the airlines from having to make profits off the employees' backs. It will be good for the public because they won't have to worry about cities losing service because the four major airlines and their "codeshare partners" deem it no longer competetive. It will reduce crowding in the skies and airports.
True, it will reduce the number of pilots needed, but I'm prepared to accept that.
Not everyone is meant to fly. The USA is among few countries in the world where air travel is cheaper than ground travel. This has only been possible because the airlines have been charging less than cost for discount fares. It's time we invest in rail and bus travel networks and return flying to what it was meant to be.

That's my rant for the day and it's all IMO.

 

[flywithastick]

My remarks about deregulation failing in other industries was an off-the-cuff remark based on what I hear in the news, on NPR...

Oh, now it's more clear!!