Congressmen may bring back airline regulation

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Congressmen may bring back airline regulation
By JOAN LOWY (AP) – 6 hours ago

WASHINGTON — Restoring financial regulation of the airline industry will be put before Congress if the Justice Department approves a proposed merger of United and Continental airlines, two key House members said Wednesday.

At a hearing on the merger, Reps. James Oberstar, D-Minn., chairman of the House Transportation and Infrastructure Committee, and Jerry Costello, D-Ill., chairman of the panel's aviation subcommittee, expressed concern about the impact the proposed deal could have on consumers and airline workers.

Deregulation has been credited with making airline travel affordable for the average American. But Oberstar pointed to the $2.7 billion the airlines earned in baggage fees in 2009 as evidence that consumers are no longer benefiting from the system. He said he believes there's support in the House for re-regulation.

"Hardly a day passes where I don't walk out on the (House) floor that someone asks me, 'When are we going to re-regulate the airlines?'" Oberstar told reporters after the hearing.

The legislation would impose federal regulation of airline pricing and re-establish a government gatekeeper role similar to that played by the old Civil Aeronautics Board prior to deregulation in 1978, Oberstar said. The board set standards for companies trying to enter the airline market and decided on a case-by-case basis which companies should be granted permission to fly passengers.

Deregulation worked for a while, bringing new, lower-cost carriers into the market and driving down fares, said Oberstar, who — as a junior congressman — voted in favor of deregulation. Most of those air carriers — as well as several "legacy" carriers dating back prior to deregulation — are gone.

The CEOs of United and Continental, who testified at the hearing, complained that competing against a steady influx of low-cost carriers who drive prices artificially low and then go bankrupt has weakened the airline industry.

Airlines have also suffered repeated shocks in recent years, including the Sept. 11 terror attacks, the SARS virus, volatile oil prices and the economic downturn. They have shed more than 158,000 full-time jobs since employment peaked in 2001 and lost an estimated $30 billion to $60 billion in recent years. At least 13 airlines have filed for bankruptcy in the past several years.

"The status quo for this industry is unacceptable," said United's Glenn Tilton.
United's proposed merger with Continental would create the nation's largest airline. Tilton and Continental's Jeffery Smisek said the new company would be able to compete more effectively against large, foreign carriers in the international market.

The new airline's financial success will be based on "synergies" produced by combining the two carriers, not higher fares, Tilton said.

However, industry experts and consumer advocates were skeptical there would be any synergy savings other than reduced competition.

Costello said the committee will ask the Justice Department, which is reviewing the merger proposal, to determine if there is evidence to support the synergy claims.

"I'm looking for a way to preserve competition," Oberstar said. "That's what I voted for in 1978."
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How would re-regulation affect all of us from the CFI to the widebody Captain? Would regional pilots stand to gain or lose from re-regulation? What about the big boys? Would the industry be slimmed down or stay as it is presently?
 
Avalon781ML said:
How would re-regulation affect all of us from the CFI to the widebody Captain? Would regional pilots stand to gain or lose from re-regulation? What about the big boys? Would the industry be slimmed down or stay as it is presently?
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You have heard the phrase "Best of both worlds" or "Have your cake and eat it too"; Not going to be the case here, you can't put the Genie back in the bottle. Re-regulation would create a smaller industry, less jobs. This is significantly different then during the regulated era when the airlines were building out the industry with 707s, 727s, 737s, DC-8s, and DC-9s.

Shrinkage of the industry would ensure a surplus of pilots hence ZERO upward pressure on wages.

One advantage would be an increase in job stability for the smaller pilot force, IF you happened to be a pilot for a favored airline.
 
That's a big order if they are trying to go back to regulating the airlines like they did pre 1978.

Back then airlines were assigned to certain exclusive routes. They also had to file their fares on those routes and justify those fares much like a utility company does today when then go in for a rate hike.

I don't see how you can do this today. Suppose you have 3 airlines flying from ATL-MIA. Do you make two of those airlines give up that route and let just one fly the route?

Do you let all three of the airlines continue to fly the ATL-MIA pairing and set a standard fare of $500 each way for each of the airlines.

Perhaps they have some other type of regulation in mind.

Maybe they will require that the airlines pay the pilots at least $150 a flight hour to fly the aircraft on the ATL-MIA route.

Or perhaps they will not allow an airline to raise or drop a price on a route without a 90 day notice?

I'm just not sure where this is going or could go. Maybe others have some ideas.

Joe
 
seaav8tor said:
One advantage would be an increase in job stability for the smaller pilot force, IF you happened to be a pilot for a favored airline.
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Favored airline is not the best but the one that donates to the right candidate. GM and Crystler franchises are an example of that.
 
Before everyone starts on the "THIS IS NEVER GOING TO WORK" stuff, lets wait and see who is lobbying what, what the plans are, etc. We know nothing of what the plan is right now. It's like telling someone whats in a movie without ever seeing a pre-view.
 
wheelsup said:
So this dumbass thinks regulating the industry will lower prices to consumers?
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I think he was saying he was for de-regulation, which did lower prices. But now he realizes that without some form of regulation, the airline industry will continue its race to the bottom which doesn't benefit passengers or employees.
 
wheelsup said:
So this dumbass thinks regulating the industry will lower prices to consumers?
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Airlines have also suffered repeated shocks in recent years, including the Sept. 11 terror attacks, the SARS virus, volatile oil prices and the economic downturn. They have shed more than 158,000 full-time jobs since employment peaked in 2001 and lost an estimated $30 billion to $60 billion in recent years. At least 13 airlines have filed for bankruptcy in the past several years.
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The new airline's financial success will be based on "synergies" produced by combining the two carriers, not higher fares, Tilton said.
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I don't see anything about lowering fares. I see trying not to raise them.
 
I cannot think of any instance, in any industry, where government regulation brought about lower prices, or even acted to keep prices the same.

If they do re-regulate, I can certainly see how it could lead to better jobs for pilots (potentially) but this isn't a given. Ticket prices will almost have to go up, route consolidation would have to occur, and some airlines would be left with far less flying (although this could act to lessen congestion and make modernization of ATC and the northeast more livable). The issue here is that if the goal of re-regulation is to still keep the prices the same, then it could potentially put further downward pressure on wages. Fuel is the great variable and largest cost, but labor is more predictable - so hammer that as much as you can. The NLRB may be less inclined to allow strikes because there are fewer carriers going to certain parts of the country, so you could theoretically cripple that region through a strike by the carrier that is assigned those routes. And besides - Frank Lorenzo and the "class of 83-85" already proved that pilots will work for far less than they were making pre-CAL strike. The Spirit guys (Kudo's to you, BTW) just showed remarkable solidarity but I would imagine that the new TA is still well short, on an inflation adjusted basis, to what pre-83 people were making, or even pre-9-11.

Lots of things to think about with re-regulation. It isn't nearly as easy to re-create as some would like it to be. Sure, fewer pilots would potentially have more awesome jobs - but that isn't a given either, and it wouldn't happen overnight.
 
Matt13C said:
I think he was saying he was for de-regulation, which did lower prices. But now he realizes that without some form of regulation, the airline industry will continue its race to the bottom which doesn't benefit passengers or employees.
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Deregulation has been credited with making airline travel affordable for the average American. But Oberstar pointed to the $2.7 billion the airlines earned in baggage fees in 2009 as evidence that consumers are no longer benefiting from the system. He said he believes there's support in the House for re-regulation.
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I took this to mean he thinks consumers are getting taken with all these extra fees.
 
Frankly, the extra fee business model is working quite well for the airlines and will not be going away unless they outlaw them.

Joe
 
Deregulation has been credited with making airline travel affordable for the average American. But Oberstar pointed to the $2.7 billion the airlines earned in baggage fees in 2009 as evidence that consumers are no longer benefiting from the system.
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The bag fees are a way to make up for the lower quoted prices to go from A to B. In a way it is like a 'stealth tax' which is not completely obvious. A proposal was for airlines to have to publish a walk-out-the-door price up front, not the come-on and then at the end add all the taxes and fees. That is good and bad.

It is bad that the customer doesn't know the total price right off. It is GOOD in that for the savvy consumer, they can see how much money is being added to the ticket price by various agencies. A recent ticket I purchased had almost an 40% increase over the initial posted prices after fees, customs charges, etc.
 
We can't allow the airline industry to run as a public necessity while being deregulated. Either allow the dinosaurs to fail or completely regulate it. Doing it half way only produces poor results, like we have seen.

I doubt regulation will be good for pilots outside of the chosen few.
 
Matt13C said:
But now he realizes that without some form of regulation, the airline industry will continue its race to the bottom which doesn't benefit passengers or employees.
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The airlines are regulated. You don't see 25 hour student pilots flying airplanes, nor do you see your local car mechanic working on them. If the airlines were truly deregulated, anyone could fly the plane and work on it. There would be no requirements for safety of the aircraft or how they are operated. People would die all the time, but they would get significantly cheaper tickets.
 
KSCessnaDriver said:
The airlines are regulated. You don't see 25 hour student pilots flying airplanes, nor do you see your local car mechanic working on them. If the airlines were truly deregulated, anyone could fly the plane and work on it. There would be no requirements for safety of the aircraft or how they are operated. People would die all the time, but they would get significantly cheaper tickets.
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Pilots and airplanes are regulated. The airline buisness model is not. Otherwise we would have Joe Schmo's and Andy Automechanics working on the airplanes that everyone owns and flies. But I think I get the nature of your post.
 
mshunter said:
Pilots and airplanes are regulated. The airline buisness model is not.
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But isn't the business model kind of regulated also? Delta and US Air try to swap some gates and are told they have to divest a certain number. They come back with their plan and are essentially told they don't like who they've agreed to give the gates to. Wouldn't this be considered the government getting involved in the business model? IMHO, it's this "regulate when we want to, but do it inconsistently" that is the most detrimental. Either regulate or don't.
 
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