Time for re-regulation

[pilotyip]

Adam Smith rules

Yes the businessman might still pay $650 for the ticket, but 25%-30% of the riders will not. The airlines complete with the private auto and the Greyhound Bus on the lower end. The price of an airline ticket goes up. Potential passengers shift from the airline the ground transport or they do not make the trip. Instead of flying to MCO for a vacation they drive to Six Flags over Ohio. 414 understnds the influence of Adam Smith. You can not mess with market forces when you are dealing in a commodity.

 

[cezzna]

Why are people worried about losing jobs through re-regualtion. they're disappearing anyway. the only new airline jobs are the crappy ones. This reminds me of when Clinton bragged about all of the jobs arkansas creates under his tenure. Most of the jobs were at chicken procesing plants paying peanuts.

If the people can't afford to fly to MCO then let them drive to six flags. Is your goal to make flying so affordable that every dirtbag in america goes on an airplane? Maybe US AIR should start taking food stamps so we can get the next tier of people in the planes. If XYZ airlines were allowed to do this by law, I guarantee some enterprising airline COO would start up the program. "Every food stamp dollar equals 2 miles at XYZ". The next week ABC airlines would start offering 3 miles per dollar thus undercutting XYZ. Sounds ridiculous right? If they were allowed to do it by law would it surprise you? It wouldn't surprise me.

A question for someone out ther who knows. Where do these airlines find financing to operate under chapter 11. I can see where they would get money from someone out of the gate under the new business plan, but then after that, where do they get it? They have no equity in anything to leverage. After they fail to emerge time and time again, they still find investors. Where? How does GE capitol sell this to their board of directors? I would think anybody giving us Air any money right now would be committing career suicide.

 

[Icelandair]

The LCA's do like to cherry pick. Tell me how you would get from Lewiston, ID to Grand Forks, ND on Southwest? Well to even get to an airport w/ southwest service, you have to drive 4 hours down to Boise. Soutwest doens't even serve MSP, i'm not sure what the closest airport is to Grand Forks, but you can be assured it is several hours driving distance away. So let the legacies go away, and who is going to serve these places? Or are you going to tell the governors to go rot? No major air service is a huge blow to a region's economy, and it becomes an endless circle. Nobody new wants to build a plant/office/hq there, because its inaccessible. Nobody new there, means no new jobs there other than maybe a few new gas station attendants, means no growth for the region. No growth, equals no air service, which starts the circle again. So if everyone followed the SWA model and offered service from only large profitable city to large profitable city, you can be assured most of red America would end up in a world of economic hurting. What about essential air service? That seems like government regulation though, i thought the objective was to get away from that. So go rot, Lewiston and Grand Forks.

 

[Publishers]

"During regulation the price airlines were able to charge was 12% over cost. So unless they just showed having a TON of cost because of being unorganized or something it shouldn't do that"

One problem with this is that it did not work. It is the same problem that we have with utilities today. First, there is little incentive to manage costs. That is how union pushed up to where they were when deregulation occured. Secondly, airlines like utilities tended to put money into other ventures that had nothing to do with the base business.

The fact is that of the legacies, only American saw the reality of deregulation correctly, managed themselves very well under Crandall, and emerged a power house. Companies like Braniff and those who rushed to get into every market on the planet died under their own greed. American's success can be directly tied to the A B scale that Crandall implemented.

You not only have the regulation deregulation discussion, there is the hub and spoke concept and point to point discussion that was a fundamental shift in airline thinking.

In addition, international flying airlines have another whole set of issues that impact them that do not with US only carriers.

What some of you would like is to ignore all the business factors and concentrate on your position.

 

[ToiletDuck]

"During regulation the price airlines were able to charge was 12% over cost. So unless they just showed having a TON of cost because of being unorganized or something it shouldn't do that"

One problem with this is that it did not work. It is the same problem that we have with utilities today. First, there is little incentive to manage costs. That is how union pushed up to where they were when deregulation occured. Secondly, airlines like utilities tended to put money into other ventures that had nothing to do with the base business.

The fact is that of the legacies, only American saw the reality of deregulation correctly, managed themselves very well under Crandall, and emerged a power house. Companies like Braniff and those who rushed to get into every market on the planet died under their own greed. American's success can be directly tied to the A B scale that Crandall implemented.

You not only have the regulation deregulation discussion, there is the hub and spoke concept and point to point discussion that was a fundamental shift in airline thinking.

In addition, international flying airlines have another whole set of issues that impact them that do not with US only carriers.

What some of you would like is to ignore all the business factors and concentrate on your position.

I agree with pretty much everything you are saying there. Makes perfect sense. Deregulation also saw it's pitfalls too, such as firing everyone and hiring new people to dodge unions... So what happened after this was done a couple times? Rules were made so that they couldn't do it anymore... Maybe regulation wasn't perfect but with a few extra rules added in to limit what can be regulated and how it should be regulated would make a huge difference. It's not impossible to find a group of people today that actually know what they are talking about that could devise a plan of action. Re-regulation could include just regulation on little things like domestic flights only with "X"% of pass/seats get certain tax breaks or something like that. Making those "sunscreen in alaska sellers" stop trying to sell there. Regulation could consist of only job security. Say you have to keep XX pilots and the airlines would have to start raising prices a little to compensate that. I'm not saying they have to tripple their price. But a gradual 15% or so increase would help a lot of people.

I flew to Thailand and stayed a week for cheaper than what renting a room at the Hilton and staying 3 days in Houston attending 6 flags would cost. I think there is still room for travel for those who want it. I like some of the other guys ideas that they posted here on the regulation part of it.

 

[Publishers]

Well we could still be using trains if we wanted to regulate everything. The sophistication of yield management, fleet management, cost containment, labor negotiations, were not part of a regulated system. Much more time was spend lobbying Congress and the CAB for a good route. Running the airline was even more political.

 

[pilotyip]

Pubs stop that, you are dealing with reality. This is a pilot board it does not deal with reality.

 

[A Squared]

The LCA's do like to cherry pick. Tell me how you would get from Lewiston, ID to Grand Forks, ND on Southwest? Well to even get to an airport w/ southwest service, you have to drive 4 hours down to Boise. Soutwest doens't even serve MSP, i'm not sure what the closest airport is to Grand Forks, but you can be assured it is several hours driving distance away. So let the legacies go away, and who is going to serve these places?

Ummm, heloooooo , you're just not getting it, if it's not profitable to run airline service on a city pair, then it shouldn't be done. Thats the whole concept, and it just apparenty keeps bouncing off your skull. If a route doesn't make money by itself, and it doesn't add revenue to the airline in the larger picture (example: feeding a hub, resulting in additional revenue) then **DON"T FLY IT** it's that simple. That's what Southwest is doing, and it's not a crime, yet you keep referring to it as if it's some sort of unspeakable practice.


Look, there is no air service between Dover-Foxtrot, Maine and Grandpa's Knob Vermont, and if you want to get there it will take more than 4 hours of driving.....but so what? and yes I think essential air service to rural towns with highway access are a complete waste of my money. Yes I've seen the empty Metros land and take off in Glasgow Montana and I've seen that no-one gets on and ono-one gets off, And I think it's high time we pulled a plug on that waste of money.


To expand my sunscreen store analogy, it's as if you think that it is mandatory that anyone who wants to sell sunscreen, must open a sunscreen store in Ketchikan, to be open 24 hours a day, 365 days a year, just for that one cruise ship passenger a year who is going to Jamaica next and wants to buy a tube.

 

[ackattacker]

Look, there is no air service between Dover-Foxtrot, Maine and Grandpa's Knob Vermont, and if you want to get there it will take more than 4 hours of driving.....but so what? and yes I think essential air service to rural towns with highway access are a complete waste of my money. Yes I've seen the empty Metros land and take off in Glasgow Montana and I've seen that no-one gets on and ono-one gets off, And I think it's high time we pulled a plug on that waste of money.

The EAS concept is based on sound economic principles, although it's a bit complex and not always perfect. In theory, providing air service to rural communities pays for itself by improving the economy in the area, increasing the tax base, and therefore increasing tax revenue.

 

[A Squared]

The EAS concept is based on sound economic principles, although it's a bit complex and not always perfect. In theory, providing air service to rural communities pays for itself by improving the economy in the area, increasing the tax base, and therefore increasing tax revenue.

Yes, I understand the theory behind EAS, the thing is the theory is fundamentally flawed. In Theory, if you provide air service it will attact industry to the area and htat will build economic prosperity with jobs and taxes. Here's the reality, if goodyear wants to build a tire plant they're going to build it, now if there airline service to Glasgow, they might build it in Glasgow, if not, guess what, they're still going to build it somewhere, and there will stll be the same number of jobs and the same amount of increased tax revenue, it just won't be in Glasgow. tell you what go to Glassgow and look around, it's a run-down depressed cow town, with no industry. The daily airline service seems to have really accomplished a great deal there.

 

[ackattacker]

Yes, I understand the theory behind EAS, the thing is the theory is fundamentally flawed. In Theory, if you provide air service it will attact industry to the area and htat will build economic prosperity with jobs and taxes. Here's the reality, if goodyear wants to build a tire plant they're going to build it, now if there airline service to Glasgow, they might build it in Glasgow, if not, guess what, they're still going to build it somewhere, and there will stll be the same number of jobs and the same amount of increased tax revenue, it just won't be in Glasgow. tell you what go to Glassgow and look around, it's a run-down depressed cow town, with no industry. The daily airline service seems to have really accomplished a great deal there.

It's true that Goodyear could build their plant anywhere... but if they build it in an area that's already prosperous then they pay more for labor and land, make less money, and pay less taxes. So it's better that they build it in a more rural area.

I didn't mean to get into the position of defending a goverment handout program... but the issue is more complex than you've made it seem. There are plenty of very good reasons to fight the povertization of rural america. It's not enough to move all the jobs to New Jersey and leave it at that. If you leave communities behind, you end up with abject poverty which ends up as a economic and social anchor. Witness New Orleans. Poor areas increase crime and cost billions in law enforcement, medical, and social security programs.

Also, bringing prosperity to an already prosperous area has less net social effect, sort of a law of diminishing returns. The prosperity a Goodyear plant brings to community like Glasgow will vastly improve the infrastructure, education, and upward mobility of its residents. The prosperity a Goodyear plant brings to, say, Boulder Colorado is a few more SUV's and rising housing prices. Guess which one mays more dividends in the long run?

 

[ToiletDuck]

Wouldn't the airlines have to recieve all the taxes though to make it work? If it helps the local governments and such yet they don't get the money from the taxes then they will still lose money.

 

[A Squared]

Wouldn't the airlines have to recieve all the taxes though to make it work? If it helps the local governments and such yet they don't get the money from the taxes then they will still lose money.

there's two differnet things being discussed:

1) Whether airlines have an obligation to fly routse which aren't profitable, which is more or less related to the topic ofhte thread.
and

2) Essential Air Services contracts, in which the government pays airlines to provide airline service to places which will never make money. This part is a little off the topic of the thread. The example I gave was Glasgow Montana which is served by Big Sky, Glasgow is a miniscule town of a little over 3000 people, with a very few much smaller towns in the area. (Frazier, pop 403, Nashua pop 375, Vandalia, pop. 35, FOrt Peck pop 325) Bear in mind that this isn't some roadless town in the wilderness where the only way to get there is by air or dogsled. Glasgow has an Interstate highway running right through it. Yet, our Tax Dollars pay for this airport, serving maybe 4000 people to have twice daily airline service during the week, and once daily during the weekend. How much does this cost? THe EAS contract for Montana was costs 5.7 million dollars, for service to 8 towns. If you divide equally that's $710,000 dollars we pay so a town of 3000 can have twice daily air service. All so thye don't have to drive a few hours on hte interstate.

Like I said in a previous post, on the few occasions I have been through Glasgo, I was present each time when the flight arrived, and like I said, it was empty, (except for the pilots of course)


To answer your original question of whather the airline makes money or not, yes they make money by flying empty airplanes around, it's like magic. Big Sky wins, GLasgow wins, Montana's Congressmen win, the only loser is the taxpayer who is footing the bill.

 

[414Flyer]

When I was in Gallup, Mesa came in there because of EAS funding. But like others have said, how many people are going to use it, when the airport is adjacent to an interstate highway, and then 2 hours from a major city like Albuquerque. Why spend money to go to the airport, check in, get on a flight which goes to ABQ, and then get your luggage, and then be without a car, when in reality, if someone had just got in their car and went, would probably have needed less time in the end, would have a car and spent less money.

They had more flights in a month, than they actually had passengers in that month.

 

[Publishers]

The concept of EAS was born of the concern with deregulation that airlines would not serve smaller towns and that air service was a right for these cities.

OK, then we will pay the airline from taxes to fly aircraft and keep the communities happy. Think postal system.

The problem with this and with the thread here is that when you introduce artificial components in a free market, things have consequences you may or may not have thought of. We also have costs associated with the airport and maintaining an airport with scheduled service which is another issue.

Should we abandon these cities, and as to the airports, there is not one in the country that does not feed at the Federal feed trough. The thing is that these decisions then become political footballs and away we go. This is what was wrong with the CAB in the end.