A return to regulation?

[SlumTodd_Millionaire]

The following article was in the Honolulu Star-Bulletin discussing the possibility of re-regulating the airlines. Looks like there might actually be the possibility of re-regulation. I won't hold my breath, but it's a good sign that they're at least talking about it.

Staggering airlines have increased pressure to abandon deregulation of the airlines enacted three decades ago. The collapse of Aloha Airlines and last week's declaration of bankruptcy by Frontier Airlines indicate a fresh look should be given to regulating airlines serving rural and remote areas.
Congress enacted the Airline Deregulation Act in 1978, ending federal control of commercial aviation and subjecting air fares and flight schedules to the forces of supply and demand. In a hearing last week before the U.S. Senate Commerce Committee, David Banmiller, Aloha's chief executive, said deregulation has been proved to be potentially harmful in achieving stable air serve for small regional markets such as Hawaii.

Inouye said he plans to conduct hearings on possible re-regulation of airlines, and Rep. Mazie Hirono said the issue of airline regulation has drawn interest. Indeed, Rep. James Oberstar, D-Minn., chairman of the House Committee on Transportation and Infrastructure, warned that pressure to re-regulate the industry is mounting in Congress.

The pressure results not only from the demise of Aloha, ATA , Skyway and Skybus and the Frontier bankruptcy but by American Airlines canceling more than 1,000 flights, stranding 100,000 passengers, while wiring in airplanes was fixed. Oberstar suggests that the wiring problems were a result of previous laxity in regulation by the Federal Aviation Administration.

When Banmiller complained to the federal Department of Transportation about predatory pricing, he said he was told, "We'll look into it." That lack of response is a sign that regulation is needed in some circumstances, if not across the industry. Rural and remote areas cannot depend on free enterprise to assure adequate service, and congressional hearings should result in a method of addressing the problem.​

 

[scramjet]

I don't see it happening because Joe Consumer will think his ultra low fares are being taken away and he'll be right about that. I think regulation is what this industry needs, but it won't happen.

Regulation would be better for the overall infrastructure, though, and might encourage a more inter-modal transportation system where people who want the low fares are going to, by willingness to spend, make the move towards buses and trains. Regulation might actually help prevent a repeat of the unregulated market, extremely high fare "superfortress hubs" of the 1990s (such as what Pittsburgh once was) by determining the optimal price that will benefit all groups involved (companies, employees, and passengers). Likewise, it might help keep fares down to small and medium sized markets where network carriers enjoy an expensive monopoly to this day.

 

[H46Bubba]

No thank you, I'll pass!

 

[dakovich]

what were the arguments for deregulation in the 70's? and who did they come from, was it a push by the airlines, the gub-ment, or the consumers?

 

[Minnesota_Flyer]

Consumers, primarily. At the time there was generally a revival of small-government, market-forces thinking. It was at around the same time that Ma Bell was being broken-up and de-regulated (for effectively the same reasons). I think that was also about the time that the post office was being turned into a more independent "business," of sorts.

I seriously doubt we'll ever see a return to government control of prices and routes. It just isn't the American way of thinking today. More likely we'll see additional regulation of pax treatment (such as the "Pax Bill of Rights") and/or giving FAA some additional teeth to badger the airlines with.

 

[Blip16]

i think we need to re-regulate

 

[WalterSobchak]

A limited form of regulation is needed. Enough with all the 50 seat RJ's.

 

[CoffeeIcePapers]

It is pretty obvious that the airlines don't understand basic economics. If they can't stay afloat, something needs to be done.

 

[SlumTodd_Millionaire]

what were the arguments for deregulation in the 70's? and who did they come from, was it a push by the airlines, the gub-ment, or the consumers?

Most airlines pushed against it, with a few remaining neutral, and only Herb at Southwest pushing hard for it because he wanted to fly outside of his limited Texas market. Alfred Kahn was Chairman of the CAB at the time and he had been brought in by Jimmy Carter specifically to reduce regulation. When Kahn went even further and proposed a complete elimination of the CAB and regulation, good 'ole Jimmy went right along with it, completely disregarding the warnings of the major airlines about how this would negatively affect the industry and the consumer. Now, 30 years later, just about every warning that the airline gave them has come to pass. Reliability is destroyed, quality is non-existent, many markets have completely lost air service, other markets have lost 727s in favor of Saabs or the dreaded RJs, etc... What Kahn claimed would benefit the consumer has done nothing but increase the headaches of the consumer. Prices are only marginally lower, but the whole air travel experience has become a nightmare.

 

[WestIndian425]

Most airlines pushed against it, with a few remaining neutral, and only Herb at Southwest pushing hard for it because he wanted to fly outside of his limited Texas market. Alfred Kahn was Chairman of the CAB at the time and he had been brought in by Jimmy Carter specifically to reduce regulation. When Kahn went even further and proposed a complete elimination of the CAB and regulation, good 'ole Jimmy went right along with it, completely disregarding the warnings of the major airlines about how this would negatively affect the industry and the consumer. Now, 30 years later, just about every warning that the airline gave them has come to pass. Reliability is destroyed, quality is non-existent, many markets have completely lost air service, other markets have lost 727s in favor of Saabs or the dreaded RJs, etc... What Kahn claimed would benefit the consumer has done nothing but increase the headaches of the consumer. Prices are only marginally lower, but the whole air travel experience has become a nightmare.

You'd have to clarify what reliability issues you're speaking of that deregulation caused. If you're referring to on-time performance and baggage handling, for example, I would take a closer look at what ATC has been complaining about (for the former) and connections (for the latter).

In terms of quality, I agree that most of the international carriers are putting us to shame, but that to me is the result of the no-frills model that's been adopted, which wasn't regulated to begin with.

Which markets have completely lost air service, and how do we know (as I posted in another thread) that cities/towns like Modesto and College Station will start seeing E-190's or even 737's instead of the Brasilia and Saabs as a result of re-regulation?

 

[SlumTodd_Millionaire]

You'd have to clarify what reliability issues you're speaking of that deregulation caused.

Reliability as in completion factor and on-time performance.

In terms of quality, I agree that most of the international carriers are putting us to shame, but that to me is the result of the no-frills model that's been adopted, which wasn't regulated to begin with.

Cause and effect. The deregulated model is what has caused the no-frills model in the first place. With the elimination of the CAB and subsidies, airlines started massive fare wars that required them to cut further and further back on the frills. Under regulation, airlines competed based on brand image and quality. If regulation were to return, airlines wouldn't have to engage in slit-throat competition that requires massive cut-backs on services and quality.

Which markets have completely lost air service, and how do we know (as I posted in another thread) that cities/towns like Modesto and College Station will start seeing E-190's or even 737's instead of the Brasilia and Saabs as a result of re-regulation?

Like I said in the other thread, the CAB issued route authority based on demand. A smaller market received a smaller airplane, and the bigger markets received bigger airplanes. The RJs that are currently flying DTW to JFK would be shifted to DTW-YNG (a market that has no air service anymore) and proper sized airplanes like 757s would be put on the DTW-JFK route.

 

[slamma1906]

Can some business/law savvy user list some of the positives and negatives for us.

 

[WestIndian425]

Hey, PCL....I'll defer the rest of my regulation/deregulation posts in the "Official Deregulation Post" thread.

 

[mpenguin1]

Can some business/law savvy user list some of the positives and negatives for us.

I would suggest reading the book Hard Landing as deregulation is discussed in length, but, let me see if I can find an objective article.

 

[Itchy]

I give it a big thumbs down.
This bumpy road we are on now will smooth out eventually.

We always were talking about the "race to the bottom". Well, maybe the bottom is in sight. The extreme lack of credit in these tougher times will serve to filter the weak out. Just sucks if you or I are on the litmus paper.

IMO, market forces will re-align what we are seeing now, capacity will be adjusted, and *maybe* profitable fares will be charged. How many money types will buy into the "Hey, we will charge 10 bucks for a ticket!" mentality now? Credit / investors are getting harder and harder to come by, and thus solid foundations are the only ones that will survive.

We do not need MORE government to solve this.

 

[Blip16]

You'd have to clarify what reliability issues you're speaking of that deregulation caused. If you're referring to on-time performance and baggage handling, for example, I would take a closer look at what ATC has been complaining about (for the former) and connections (for the latter).

In terms of quality, I agree that most of the international carriers are putting us to shame, but that to me is the result of the no-frills model that's been adopted, which wasn't regulated to begin with.

Which markets have completely lost air service, and how do we know (as I posted in another thread) that cities/towns like Modesto and College Station will start seeing E-190's or even 737's instead of the Brasilia and Saabs as a result of re-regulation?

airlines pulled out of markets that didnt' have much demand and didn't make money outside of regulation. at least from what i remember from a class a few years back

 

[Blip16]

I give it a big thumbs down.
This bumpy road we are on now will smooth out eventually.

We always were talking about the "race to the bottom". Well, maybe the bottom is in sight. The extreme lack of credit in these tougher times will serve to filter the weak out. Just sucks if you or I are on the litmus paper.

IMO, market forces will re-align what we are seeing now, capacity will be adjusted, and *maybe* profitable fares will be charged. How many money types will buy into the "Hey, we will charge 10 bucks for a ticket!" mentality now? Credit / investors are getting harder and harder to come by, and thus solid foundations are the only ones that will survive.

We do not need MORE government to solve this.

this industry is highly controlled by the government, the only things that are not are fares and routing. this industry has proven that deregulation doesn't work

 

[Itchy]

this industry is highly controlled by the government, the only things that are not are fares and routing. this industry has proven that deregulation doesn't work

This economy dynamic may change that. It just will painful to go through.

 

[Lee D]

I'd be suprised to see it go back to the way it was. Are there any industires that have ever been deregulated and gone back? However if things really got bad I could see the Govt stepping in somewhat to keep things afloat, simply because it is a major piece of the USA/World infrastructure.

 

[Fly4Pay]

It is pretty obvious that the airlines don't understand basic economics. If they can't stay afloat, something needs to be done.

Something IS being done--businesses that don't know how to run their business go out of business! That's the way that capitalism works--do a good job, or you're gone.

As it should be....