Time for Limited Re-Regulation of the Industry

[neflier]

Fellow Pilots,

If something isn't done to correct the situation eventually market forces will prevail in the
failure of additional airlines. It is my personal belief that Frontier Airlines will not emerge
from Chapter 11 Bankruptcy. I also believe that there will be more to follow. Eventually the market will correct itself but at what cost? The system is already running at full capacity and is straining at every seam. If something, possibly such as I am proposing, isn't done about the problem the cost's to the Industry will be insurmountable and the US consumer will feel the pain that will be exponentially higher than that of which I am proposing. Initially load factors would drop as the consumer adjusts to paying $1500 for a round-trip coast to coast ticket, but the higher fair would enable the carriers to post a profit with a MUCH lower load factor. The US consumer has adjusted quite easily to $3+ per gallon fuel, $4 per gallon milk,$3 per loaf of bread and $400,000 homes: They will adjust to increased airfares as well.

Fly Safe!

I see one major problem with your position. The US consumer has not easily adjusted to $3+ gas, $400K homes, etc. They are being bled dry. The typical family of 4 will not pay $6,000 in airfare alone for a vacation across the country. For every dollar that you raise ticket prices, there will be a certain number of travelers who will not be able to afford the flight.

Increased ticket prices will result in reduced load and an excess number of seats. The end result will be the same. Carriers will go of business.

 

[Thebadcat1313]

I see one major problem with your position. The US consumer has not easily adjusted to $3+ gas, $400K homes, etc. They are being bled dry. The typical family of 4 will not pay $6,000 in airfare alone for a vacation across the country. For every dollar that you raise ticket prices, there will be a certain number of travelers who will not be able to afford the flight.

Increased ticket prices will result in reduced load and an excess number of seats. The end result will be the same. Carriers will go of business.

It's going to happen anyway. When the industry was deregulated, everyone said we'd end up in 30 years with 3 or 4 major airlines. We're speeding toward that situation as we speak. At least we'd be able to nonrev once in awhile instead of losing a seat to some tattooed, smelly kid with his I-pod cranked up.

 

[Kugelblitz]

Agreed, there is no way this industry will be re-regulated. The dumb#sses like Mr. Oberstar want to treat the airline industry just like Target, Walmart, and K-Mart. As they do in all other things, the politicians know nothing about what they have jurisprudence over, only how to get money for themselves.

 

[XGmaninGA]

Are you kidding me? The peoples "right" of cheap tickets will lead to Open Cabotage. There will be no American carriers soon.

 

[AutoBus]

Fellow Pilots,

As much as I dislike Government interference in our affairs, private or public, I feel that the time has come for re-regulation of portions of the the US Domestic Airline Industry in regards to fuel cost's, associated overhead, tax relief and domestic ticket pricing.

For the past 7 years the traveling public has enjoyed less than cost airfares subsidized with the pay, benefits and retirements of airline employees. This has to stop. With the continued weakening of the US Dollar and subsequent increase in the cost of Oil and Fuel the liquidity of all US Air Carriers is in jeopardy. There is nothing left to cut. Wages are at a 30 year low (when adjusted for inflation we make less than we did in 1978), our medical benefits are a fraction of what they used to be and we've lost our retirement.

Everything has been outsourced to low bid contract workers, reservations, maintenance, cleaners, rampers and the list goes on. Again, there is nothing left to cut. If something isn't done and done by the end of this fiscal year I predict that several more US Carriers will liquidate, one of them possibly a Major Carrier.

What am I proposing? Partial re-regulation of the Domestic US Market. It should be illegal to sell a seat on a segment for less than the cost of providing the service. Airlines should not be shouldered with an insane tax code that puts us into the red while the oil company's that are supplying the fuel post record profits.

1. The minimum ticket price per segment should be based on actual operating cost + fuel.
This would be determined by using the US weekly average on highway costs of gasoline
multiplied by the average mileage per car multiplied by distance. For example: FLL to
SEA is 3250 miles/25mpg x $3.55 per gallon: $461 base price JUST for fuel, CASM
(Cost per seat mile) excluding fuel, per airline (as reported in quarterly filings with the
Securities and Exchange Commission) would be added to the minimum fuel charge.
Airlines would continue to be able to compete on a cost and competitive basis but fuel
would be taken OUT of the equation.

2. Tax Relief: The Airline industry should be treated NO different that the Surface
Transportation Industry. The related fuel-surcharges should not be treated as revenue
for tax purposes. The fuel surcharge above and beyond a base rate of $1.12 per gallon
should be excluded: Which is the same that the Trucking Industry currently enjoys and
has for years.

If something isn't done to correct the situation eventually market forces will prevail in the
failure of additional airlines. It is my personal belief that Frontier Airlines will not emerge
from Chapter 11 Bankruptcy. I also believe that there will be more to follow. Eventually the market will correct itself but at what cost? The system is already running at full capacity and is straining at every seam. If something, possibly such as I am proposing, isn't done about the problem the cost's to the Industry will be insurmountable and the US consumer will feel the pain that will be exponentially higher than that of which I am proposing. Initially load factors would drop as the consumer adjusts to paying $1500 for a round-trip coast to coast ticket, but the higher fair would enable the carriers to post a profit with a MUCH lower load factor. The US consumer has adjusted quite easily to $3+ per gallon fuel, $4 per gallon milk,$3 per loaf of bread and $400,000 homes: They will adjust to increased airfares as well.

If you agree with me on some of my ideas, all of them or disagree...I encourage you to write me back for discussion. Please feel free to forward this to all Industry types on your personal email list. I will be forwarding it to my US Congressmen, my MEC, ALPA and I STRONGLY encourage you to do the same.

Fly Safe!

Sorry, I have to ask. Were you even born before de-regulation?

Do you have any idea what you are talking about, or are simply re-hashing what your liberal community-college economics professor spewed out?

The only reason you want regulation is because you think it will increase your pay and improve your working conditions.

In every segment of the economy it's "not your grand fathers world" things have changed! let it go...


While that's nice, it's not enough reason to regulate an industry.

Regulation does NOT work, it drives up costs and limits options to the point that people avoid using the product.

That's why the industry was De-regulated.

 

[hindsight2020]

I see one major problem with your position. The US consumer has not easily adjusted to $3+ gas, $400K homes, etc. They are being bled dry. The typical family of 4 will not pay $6,000 in airfare alone for a vacation across the country. For every dollar that you raise ticket prices, there will be a certain number of travelers who will not be able to afford the flight.

Increased ticket prices will result in reduced load and an excess number of seats. The end result will be the same. Carriers will go of business.

Bingo! The OP severely underestimates the price elasticity of air travel to the median consumer. I can tell you we've had several opportunities to partake in discretionary travel this year and all times we've elected to drive or not go at all. So yeah, grandma IS staying at home as it is. My fiancé is driving 840 miles one way to a friends wedding precisely due to the high ticket prices...there may be 99 airfares in some city-pairings, yet we've (the median consumer) never been able to take advantage of them in our market, more like 350 bucks one ways, yeah sorry grandma, driving it is...$4/gal gas you say..sorry grandma hope you're still around next year. Increases in air fare in the order of what re-regulation calls for will yield a fatal drop in passenger traffic without a doubt, most will revert to using air travel for emergencies and deaths only.

Even if we were to accept the fantasy land version of passenger price elasticity, you're still bidding against your own economic interest by function of economies of scale. Those at the top will gain salary and QOL while an increasing numbers can't find a job at all. Look I'm all about making attempts to restore some of the viability of the career, but I think that ship has sailed. I don't think re-regulation (which I doubt will ever happen) would prove viable.

 

[Lear70]

Bingo! The OP severely underestimates the price elasticity of air travel to the median consumer. I can tell you we've had several opportunities to partake in discretionary travel this year and all times we've elected to drive or not go at all. So yeah, grandma IS staying at home as it is. My fiancé is driving 840 miles one way to a friends wedding precisely due to the high ticket prices...there may be 99 airfares in some city-pairings, yet we've (the median consumer) never been able to take advantage of them in our market, more like 350 bucks one ways, yeah sorry grandma, driving it is...$4/gal gas you say..sorry grandma hope you're still around next year.

You must live in a very rural area.

My buddy Rook (who is on this board) is getting married next weekend. We found out last-minute that we could get child care and are going. Southwest 10-day advance fare purchase? $70 plus tax each way, $298.50 including taxes. Would have cost us $280 to drive the car. Break-even.

You're in the minority. For most people, it's still cheaper to fly than to drive, and I guarantee you that airlines aren't covering their costs. Take a look at this quarter's reports with higher-priced fuel... just about EVERYONE is in the red.

Increases in air fare in the order of what re-regulation calls for will yield a fatal drop in passenger traffic without a doubt, most will revert to using air travel for emergencies and deaths only.

One word. BULLSH*T. BULLLLL SH*T.

25+ years ago, before Southwest greatly expanded, before jetBlue and airTran became a household name, airfares were substantially higher than they are now. I know, I was non-revving around with my Dad whenever the loads were low enough to go (rarely).

Those airplanes were full. With higher ticket prices. You're alarmist crap has absolutely ZERO basis in fact. People will still travel. Yes, loads will fall off somewhat as the trailer trash of America finds it's cheaper to drive or take Greyhound again (as it should be), but the airline industry will not collapse.

Maybe you and Al Gore should become golf buddies.

Even if we were to accept the fantasy land version of passenger price elasticity, you're still bidding against your own economic interest by function of economies of scale. Those at the top will gain salary and QOL while an increasing numbers can't find a job at all.

True, but not in the numbers you're screaming about. ANY fix to this industry is going to be painful, either for consumers, or for our national budget, or for the employees, and a possible combination of two or all three of those factors.

Look I'm all about making attempts to restore some of the viability of the career, but I think that ship has sailed. I don't think re-regulation (which I doubt will ever happen) would prove viable.

To some extent I agree. The biggest issue here is the first paragraph of the original poster's mission statement; I've been saying the same thing for 7 years.

Until the airline industry is FORCED by legislation to charge AT LEAST the price of producing their commodity, an aircraft seat, on each and every seat pairing ON AN INDIVIDUAL LEG-BY-LEG BASIS, this cyclical industry cycle of "profit, corporate raiding, bankruptcy, government bailout" will continue.

Add to that the need for strict limits on the amount of cash reserves/capital/stock that can be used for corporate executive compensation packages to prevent the "raiding of the kitty" before the executives exercise their golden parachutes.

Full re-regulation of the industry? Not viable in all likelihood.

However, putting constraints on the industry that FORCE the CEO's to operate it in a fiscally-responsible way and limit their options to corporate raiding and/or bankruptcy, and we might have something that's even REMOTELY sell-able in Washington and to the American public.

Yes, ticket prices would likely go up in this scenario, but not nearly as drastically as full re-regulation.

Just my .02 cents (which is probably worth about the same amount - not even a Starbucks...).

 

[FLYLOW22]

Yeah....I'm for Socialism and Communism too!

It worked for your maintenance department.

 

[atrdriver]

Yeah....I'm for Socialism and Communism too!

Has it occurred to you that EVERY aspect of this industry is already regulated EXCEPT ticket prices? Either regulate the whole thing or get the government out of it completely.

 

[CitationUltra]

Fellow Pilots,

As much as I dislike Government interference in our affairs, private or public, I feel that the time has come for re-regulation of portions of the the US Domestic Airline Industry in regards to fuel cost's, associated overhead, tax relief and domestic ticket pricing.

For the past 7 years the traveling public has enjoyed less than cost airfares subsidized with the pay, benefits and retirements of airline employees. This has to stop. With the continued weakening of the US Dollar and subsequent increase in the cost of Oil and Fuel the liquidity of all US Air Carriers is in jeopardy. There is nothing left to cut. Wages are at a 30 year low (when adjusted for inflation we make less than we did in 1978), our medical benefits are a fraction of what they used to be and we've lost our retirement.

Everything has been outsourced to low bid contract workers, reservations, maintenance, cleaners, rampers and the list goes on. Again, there is nothing left to cut. If something isn't done and done by the end of this fiscal year I predict that several more US Carriers will liquidate, one of them possibly a Major Carrier.

What am I proposing? Partial re-regulation of the Domestic US Market. It should be illegal to sell a seat on a segment for less than the cost of providing the service. Airlines should not be shouldered with an insane tax code that puts us into the red while the oil company's that are supplying the fuel post record profits.

1. The minimum ticket price per segment should be based on actual operating cost + fuel.
This would be determined by using the US weekly average on highway costs of gasoline
multiplied by the average mileage per car multiplied by distance. For example: FLL to
SEA is 3250 miles/25mpg x $3.55 per gallon: $461 base price JUST for fuel, CASM
(Cost per seat mile) excluding fuel, per airline (as reported in quarterly filings with the
Securities and Exchange Commission) would be added to the minimum fuel charge.
Airlines would continue to be able to compete on a cost and competitive basis but fuel
would be taken OUT of the equation.

2. Tax Relief: The Airline industry should be treated NO different that the Surface
Transportation Industry. The related fuel-surcharges should not be treated as revenue
for tax purposes. The fuel surcharge above and beyond a base rate of $1.12 per gallon
should be excluded: Which is the same that the Trucking Industry currently enjoys and
has for years.

If something isn't done to correct the situation eventually market forces will prevail in the
failure of additional airlines. It is my personal belief that Frontier Airlines will not emerge
from Chapter 11 Bankruptcy. I also believe that there will be more to follow. Eventually the market will correct itself but at what cost? The system is already running at full capacity and is straining at every seam. If something, possibly such as I am proposing, isn't done about the problem the cost's to the Industry will be insurmountable and the US consumer will feel the pain that will be exponentially higher than that of which I am proposing. Initially load factors would drop as the consumer adjusts to paying $1500 for a round-trip coast to coast ticket, but the higher fair would enable the carriers to post a profit with a MUCH lower load factor. The US consumer has adjusted quite easily to $3+ per gallon fuel, $4 per gallon milk,$3 per loaf of bread and $400,000 homes: They will adjust to increased airfares as well.

If you agree with me on some of my ideas, all of them or disagree...I encourage you to write me back for discussion. Please feel free to forward this to all Industry types on your personal email list. I will be forwarding it to my US Congressmen, my MEC, ALPA and I STRONGLY encourage you to do the same.

Fly Safe!

As a general overall comment I would say that the market is correcting itself.

That is why you are seeing bankruptcies of carriers with failed business models that have run out of time and money, and consolidation among network carriers that believe that mergers can save them from the failure of their business models.

It should be intuitively obvious that a product or service should not be sold below cost, but I'm not sure it will take re-regulation to enforce the immutable laws of economics. The country is not going to be worse off with three or four fewer network air carriers and a net 30-40 percent or greater reduction in capacity.