Regulate 'em, Crandall says

[PCL_128]

You're still incorrect about how fares were set under the CAB. Do some research.

 

[Lear70]

Well, I guess I should thank you for making most of my points for me...

Lear your point about age is still irrelevant. You don't have to be "around" to understand how something worked. The CAB set the fares airlines could charge based on certain variables. You are right though, they weren't arbitrary. The only thing airlines could use to differentiate themselves was service. That is not using market forces to determine price, that is artificial. In a free market, that is not good for the consumer.

It was never about age, it was about understanding how it worked. Now that you've admitted it wasn't arbitrary, as you first alluded to, we're closer to a point we can work with.

Yes, market forces SHOULD determine price and, if ALL safety nets were removed, as they are in the normal free market, then deregulation might have had a chance at succeeding. In this case, what we have is something that benefits SOME of the consumers, those who are SOLELY price-driven (the types who bought tickets on Skybus), but not necessarily benefits ALL consumers (those who would still like decent customer service), while screwing the employees and the federal government that has to pick up the slack. Which leads me to your next point (thanks for the segue).

If a company chooses to sell something for cheaper than it cost them to make it, why should the government care?

Because the Federal Government is who has to pick up the tab in forms of government bailout packages, subsidized PBGC payments, and the millions that gets dumped back on them in taxpayer debt with unemployment payments, federal loan defaults, etc, once that carrier files bankruptcy and furloughs thousands under that policy of selling a product cheaper than it costs to produce, reorganizes, then comes out and does it again.

Why stop at the airlines? Why not include every other industry and tell them how much to charge for shoes, or pots?

Because the average shoe store doesn't cost the Federal Government and other companies Billions of Dollars when they default on their loans, file bankruptcy, then get more government money to start up again. It just goes out of business.

The bankruptcy issue needs to be fixed to allow airlines to die when they can't operate successfully. In a free market, someone will fill the niche and make a profit if there is any to be made.

Now we're talking... about more regulation. The airlines are the most highly-regulated "free market" in the history of the United States. What you're talking about here (and what I've been saying for years) is further regulation restricting airlines in their bankruptcy filing ability, even further than it's already been restricted.

This is yet another artificial constraint, yet you seem to agree with this one. Why this one and not full regulation? What's the determining factor? How much additional regulation needs to be set in place to get "deregulation" to actually work?

Interesting dichotomy, eh?

Service might be at an all-time low, but so are air fares. I guess maybe we could poll people and ask "given a choice, would you prefer better coach service or cheaper fares". Personally, when I sort rental cars on Expedia, I sort by lowest price first. If the rental car company can't pay its bills with that stated price, that's none of my concern. Since they aren't saved by bankruptcy laws, they might just go under.

Exactly,,, however,,, most car rental agencies aren't primarily a service industry. You have a short customer service experience picking up and dropping off the car, but you're on your own while you have it. An airline ticket isn't the same animal, although it HAS been reduced to close to that.

Kind of like the new Southwest commercials making fun of the lack of customer service at other airlines and "how far will they go", pointing out that there is a lot of service in the airline business that, unless it's missing, is transparent. The new cost structures are chipping away at that service. How low can we go? Interesting thought, albeit on a tangent...

I agree with you on the SWA and Delta comparison. I think SWA will grow ever more dominant in the US and push the legacies out to the international routes. They run an efficient airline not brought up in a regulated world.

Oh they started their operations during regulation. They just found ways to operate around it until deregulation occurred.

But I think you're right about the Legacies. IF the safety nets were removed and the system was allowed to sort itself out without the feds stepping in to "rescue" someone, you'd likely end up with 2 large LCC's doing most of the domestic trips and feeding the 2 or 3 Legacies doing almost primarily international service, and a few fringe carriers like Alaska and such doing some niche flying.

You said Airlines STILL PRODUCE ASM'S on a route that doesn't have the demand, either for "market share" or for "frequency" or for "schedule alignment". If they can't get RPM to equal ASM, they aren't even breaking even and are losing money. Subsidizing these inefficient routes with highly profitable ones had been the norm, but there aren't many profitable ones anymore. Regardless though, constantly losing money should lead them out of business.

Exactly. :beer:

Most industries don't fall under any type of regulation. As far as the utilities, I shopped for a utility company online and pay a lot less than the BIG one. I haven't had a problem in 4 years with it.

Which utility are we talking about here? Phone service? Cable service? Sure, with new technologies that can bundle it all together over EXISTING leased lines, not a problem.

Water and Electric? Still regulated. In most areas I've lived, you can't get Electric, Gas, or Water except through the single government-regulated company. While I might WISH for cheaper utilities that deregulation might provide for, I don't want to give up the transparent service I get, i.e. I don't want problems with my electric, gas, or sewer.

We really should improve the bankruptcy laws that don't work instead of trying fix deregulation, which for consumers does work.

Again, it's only working for the trailer park citizens of America who have enjoyed air travel as an option more affordable than driving long distances. It was never designed to be that, yet that's what it has become.

The truth is, it costs money to produce this product and, if airlines are forced to price their product to make money, without the bankruptcy safety nets in place, fares will go up dramatically, pricing those consumers out of the product.

Will you still say deregulation is good for them THEN, when we're back to 80's-era ASM's and only 50% of the people can afford to fly? Loss of bankruptcy ability equals pricing product responsibly equals large increase in prices equals not as many people being able to fly.

Can't have it both ways.

 

[Visceral]

This could go on forever, but I don't have your forum stamina Lear. Though I don't agree with some of what you say, I think you make some interesting points. I don't think government should be in the welfare system for companies. There is obviously an incentive in place if airlines are continuing to go bankrupt and reorganize. That is an incentive that should be removed. Lastly, yes fewer people will be able to fly if loss of bankruptcy ability equals pricing product responsibly equals large increase in prices. But, won't fewer be able to fly if the prices are set at some minimum fare decided by the future CAB? At least with free market, I get to decide if it is worth it. Anyway, good insights from you.:beer:

 

[AC560]

In this case, what we have is something that benefits SOME of the consumers, those who are SOLELY price-driven (the types who bought tickets on Skybus), but not necessarily benefits ALL consumers (those who would still like decent customer service), while screwing the employees

Nobody cares about the airline employees anymore then they cared about all the manufacturing jobs shipped to China. Airline pilots need to take a page from the the drill press operator and retrain for a new career. This certainly sucks but it is reality (sort of like the now moot age 65 debates, who cares it is reality now time to move on).

Deregulation has wildly benefited consumers in ways which were unimaginable 30yrs ago. What is happening now is the market is driving the necessary changes which are reduced capacity and more sensible route structures.

Oil effects every business in America, the airline industry isn't special. Like everyone else it has to reevaluate pricing, grind out some efficiencies, etc. UPS/FedEx use a lot of gas in the air and on the ground, I don't see them going bankrupt. Once the legacy carriers focus on the bottom line as opposed to market share, they will make money; simple as that.

 

[Lear70]

This could go on forever, but I don't have your forum stamina Lear. Though I don't agree with some of what you say, I think you make some interesting points. I don't think government should be in the welfare system for companies. There is obviously an incentive in place if airlines are continuing to go bankrupt and reorganize. That is an incentive that should be removed. Lastly, yes fewer people will be able to fly if loss of bankruptcy ability equals pricing product responsibly equals large increase in prices. But, won't fewer be able to fly if the prices are set at some minimum fare decided by the future CAB? At least with free market, I get to decide if it is worth it. Anyway, good insights from you.:beer:

Agreeing to disagree is a Flightinfo tradition...

I think we're mostly on the same page, just different points of view on the subject. Fly safe out there!

 

[atrdriver]

Cities shouldn't stop receiving transportation services simply because a route isn't profitable. We need to stop thinking of transportation as just another business, and realize that it's actually a public utility necessary to the functioning of our economy.

I can't believe you said that. Public transportation isn't a right, nor should it be. If you live in a small town, there are pros and cons to it. One of the cons may just be that you need to drive into a larger city to get on interstate transportation. It is not the business of DAL, AAI, CAL, or the federal government to fly, or operate a train or bus into a market that is losing money.

 

[atrdriver]

since you're stating "facts" do you care to back this statement up? if you will look it up you will see that Bush I and his SecDef Cheney are the ones who started the demobilization of the military (at a MUCH higher rate than Clinton).

this has been beaten to death in other threads. Clinton simply CONTINUED Bush I's policy of demobilization.

It wasn't just a question of mobilization. How many cruise missiles did Clinton shoot off, without new ones being built? Remember when Clinton rolled his eyes at the marines at the foot of Marine One? A lot of it was morale realted, because every man in uniform knew that his commander in chief "loathed" him.

 

[atrdriver]

Crandall might believe regulation is good for airlines (and pilots), but it is definitely not good for consumers. Let the market determine how much it should cost for a ticket from A to B. The market has proven itself time and again to eliminate waste and reward efficiency. Clogging it up with some artificial pricing scheme run by the government is crazy.

Fine. Let the market decide. And it is the airlines job to make sure they make money. So how much of a fare increase is required across the board for that to happen? Let the consumers decide about that higher priced ticket. Either way, regulated or not, ticket priced HAVE to go up.

 

[BigMeat]

That was what, 20 years ago? This is CRAZY. And no, you can't just "sell it to America", unless you want to completely withdraw from the world economy. Oil doesn't work that way.

And this exactly why we need to reregulate. It isnt going to work. Pumping more oil into the environment will help 10 years from now. By then oil consumption by many third world countries will skyrocket. Im not saying dont drill. Im saying it isnt going to help.

 

[PCL_128]

I can't believe you said that. Public transportation isn't a right, nor should it be.

I never said it was. It is, however, an extremely vital part of our nationwide economy, and allowing markets to be completely removed from the transportation network is in no one's best interests.

 

[NEDude]

The problem with this industry in this country is that on one hand it is trying to be run like a normal private industry, on the other the government considers it an industry that is essential to the national economy and thus in the national interest.

We have the bankruptcy laws that allow failing airlines to survive and the RLA that limits what airline employees can do all in order to protect this vital national resource. Yet allow for almost total free market competition when it comes to routes and fares.

The industry needs to pick one side or the other. Completely open it up to free market operations, meaning failing companies can be allowed to fail, and the employees of said company are allowed to exercise self help without limitation. Or go the other way and treat it as an essential part of our nation and completely regulate it again.

 

[flyipilot]

Please excuse me, but I need this one explained. "Labor-Cost parity"? Does that mean more work for less money? Otherwise, I agree with him.

You WILL be working more for far less money...wait and see...

 

[Cobra17]

I can assure you that Crandall is not interested in protecting your job.

http://consumerist.com/342889/ameri...randall-shares-his-crazy-cost+saving-strategy

I love how he says "true story" at the end. Really? Since when do dogs get paid anyways?

 

[PCL_128]

I can assure you that Crandall is not interested in protecting your job.

Of course not. He is, however, interested in protecting this industry. That means re-regulation. Indirectly (probably to his great dismay), that will protect our jobs.