walden
Well-known member
- Joined
- Oct 8, 2004
- Posts
- 121
The battle over airline regulation Two stories have come out this past week on the costs and benefits of deregulation in air travel. In the Sunday New York Times, Micheline Maynard examines the debate in the United States over airline deregulation. Some groups don't like it:
Since federal restrictions on routes and fares were removed, consumershave been saving $20 billion a year on air fares, when adjusted forinflation, according to Brookings. Fares have dropped by more than 30percent, on average, and as much as 70 percent when tickets are boughtin advance, the group concluded.
At the same time, airlines have vastly expanded their networks,bringing air travel - a relatively infrequent experience [severaldecades ago] - to people all over the country. For example, American,the biggest airline, flew to just 50 cities in 1975; it now serves morethan three times that number. Southwest, which started in 1971 with asingle route in Texas, now flies to 61 cities, not counting those itserves through a code-sharing arrangement with ATA.
Read the whole thing -- the major airlines are facing a seriousfinancial squeeze, to be sure -- but the 2001 post-9/11 governmentbailout worsened rather than aided their situation.
Meanwhile, Matt Welch has a great piece in Reasonthat looks at the travel revolution that low-cost airlines have broughtto Europe. The effect has transcended the airline industry:
The other common theme is that these costs are dwarfed by themassive benefits that consumers have accrued in the form of lower airfares and a greater variety of travel options.
Be sure to read the Welch piece on how deregulation could go further.
[R]epresentatives of labor unions and some consumer groups, long forthe stability of the time, before 1978, when the government decidedfares and determined where airlines would fly. Labor unions inparticular are looking for an alternative to the current situation,having been hit this decade by five airline bankruptcies, theelimination of more than 120,000 jobs and cuts of as much as 50 percentin pay and benefits.
These groups say it is time to consider reregulating airlines, or atleast to start a debate about how to stabilize an industry that may beso vital to the nation's fabric that government intervention iswarranted....
"Are we willing to accept the results of a free marketplace, or dowe think the role of commercial aviation is such a part of our economythat we have to have government influence?" asked Patricia A. Friend,president of the Association of Flight Attendants, a labor union thatrepresents about 75,000 airline employees. "It's a conversation I'dlike to have before everyone wakes up and asks, 'What the hellhappened?' "
So what are the results of that free marketplace? Read on: These groups say it is time to consider reregulating airlines, or atleast to start a debate about how to stabilize an industry that may beso vital to the nation's fabric that government intervention iswarranted....
"Are we willing to accept the results of a free marketplace, or dowe think the role of commercial aviation is such a part of our economythat we have to have government influence?" asked Patricia A. Friend,president of the Association of Flight Attendants, a labor union thatrepresents about 75,000 airline employees. "It's a conversation I'dlike to have before everyone wakes up and asks, 'What the hellhappened?' "
Since federal restrictions on routes and fares were removed, consumershave been saving $20 billion a year on air fares, when adjusted forinflation, according to Brookings. Fares have dropped by more than 30percent, on average, and as much as 70 percent when tickets are boughtin advance, the group concluded.
At the same time, airlines have vastly expanded their networks,bringing air travel - a relatively infrequent experience [severaldecades ago] - to people all over the country. For example, American,the biggest airline, flew to just 50 cities in 1975; it now serves morethan three times that number. Southwest, which started in 1971 with asingle route in Texas, now flies to 61 cities, not counting those itserves through a code-sharing arrangement with ATA.
Meanwhile, Matt Welch has a great piece in Reasonthat looks at the travel revolution that low-cost airlines have broughtto Europe. The effect has transcended the airline industry:
In less than a decade, the Southwest Airlines revolution has sweptthrough sclerotic Europe like a capitalist hurricane, leaving afundamentally altered continent in its wake. Low-cost airlines havegrown from zero to 60 since 1994 by taking Southwest’s no-frills,short-haul business model and grafting on infinitely variable pricing,aggressive savings from the contemporaneous Internet revolution, andthe ripe, Wild West opportunities of a rapidly deregulating andexpanding market. Europeans, fed up with costly train tickets, annoyingmotorway tolls, and Concorde-style prices from national “flag carriers”such as Air France and Lufthansa, have defected to the short-hoppers indroves—200 million, nearly 45 percent of the entire E.U. population,took a low-cost flight in 2003 alone.
These airline upstarts are run by swaggering young CEOs whom theEuropean press treat like rock stars, living up (or down) to thebilling by issuing manly predictions of price war “bloodbaths” andpulling off daring publicity stunts, such as Irish carrier RyanAir’spost–September 11 sale of 1 million tickets for “free” (before taxes).Their companies have been rewarded with dot-com-bubble-like stockvaluations—and the volatility that comes with them—while theirlong-haul counterparts dodder toward cutbacks, bankruptcy, and worse.(Switzerland became the first European country to lose its nationalairline when Swiss Air and Sabena folded in 2001.) In less than ageneration, one of the Western world’s most notoriously regulated anddistorted markets has become a poster child for unified Europe’s 21stcentury élan.
In the process, Europeans have changed not only their travel choicesbut the way they behave. “We aren’t just teaching our customers aboutour brand,” says Stanislav Saling, the twentysomething Slovak publicrelations director of SkyEurope, a new Bratislava-based low-costcarrier. “We’re selling tickets to people who have never flown before,and showing them how to use the Internet.” Brits, who have led thelow-cost charge with RyanAir and easyJet, are now the world’s biggestowners of foreign second homes as a percentage of population. Acrossthe 25-country, 458-million-resident European Union, marriage betweendifferent nationalities is at an all-time high. Residents ofpost-communist countries, who not long ago were more than happy to takeany handouts from their far richer Western neighbors, are nowleveraging the low-cost revolution to compete with them instead. OldEurope’s postwar business culture, in which CEOs of highly regulated“National Champions” were virtually interchangeable with theirschoolboy pals in government, has been battered by entrepreneurialmavericks of hard-to-define provenance, such as easyJet’s 37-year-oldfounder Stelios Haji-Ioannou, who was born in Greece, owns houses infour countries, and (as The New York Times put it in April) “feelsGreek when he is in London, English when he is in Greece, and Europeanwhen he is in America.”
One common theme in bothof these pieces is that deregulation is not without its costs --there's more uncertainty about the financial viability of someairlines, greater stress on airline employees as these firms arepressured to improve their productivity, and as the case of RyanAirdemonstrates, a few airlines that appear to delight in irritiatingtheir customers. These airline upstarts are run by swaggering young CEOs whom theEuropean press treat like rock stars, living up (or down) to thebilling by issuing manly predictions of price war “bloodbaths” andpulling off daring publicity stunts, such as Irish carrier RyanAir’spost–September 11 sale of 1 million tickets for “free” (before taxes).Their companies have been rewarded with dot-com-bubble-like stockvaluations—and the volatility that comes with them—while theirlong-haul counterparts dodder toward cutbacks, bankruptcy, and worse.(Switzerland became the first European country to lose its nationalairline when Swiss Air and Sabena folded in 2001.) In less than ageneration, one of the Western world’s most notoriously regulated anddistorted markets has become a poster child for unified Europe’s 21stcentury élan.
In the process, Europeans have changed not only their travel choicesbut the way they behave. “We aren’t just teaching our customers aboutour brand,” says Stanislav Saling, the twentysomething Slovak publicrelations director of SkyEurope, a new Bratislava-based low-costcarrier. “We’re selling tickets to people who have never flown before,and showing them how to use the Internet.” Brits, who have led thelow-cost charge with RyanAir and easyJet, are now the world’s biggestowners of foreign second homes as a percentage of population. Acrossthe 25-country, 458-million-resident European Union, marriage betweendifferent nationalities is at an all-time high. Residents ofpost-communist countries, who not long ago were more than happy to takeany handouts from their far richer Western neighbors, are nowleveraging the low-cost revolution to compete with them instead. OldEurope’s postwar business culture, in which CEOs of highly regulated“National Champions” were virtually interchangeable with theirschoolboy pals in government, has been battered by entrepreneurialmavericks of hard-to-define provenance, such as easyJet’s 37-year-oldfounder Stelios Haji-Ioannou, who was born in Greece, owns houses infour countries, and (as The New York Times put it in April) “feelsGreek when he is in London, English when he is in Greece, and Europeanwhen he is in America.”
The other common theme is that these costs are dwarfed by themassive benefits that consumers have accrued in the form of lower airfares and a greater variety of travel options.
Be sure to read the Welch piece on how deregulation could go further.
