Deregulation....Success or Failure??

[cfii2007]

Yup....this pretty much sums it up!!!

You (beep)ing academic eggheads! You don't know (beep) . You can't deregulate this industry. You're going to wreck it. You don't know a (beep) thing!

Robert L. Crandall, CEO American Airlines, addressing a Senate lawyer prior to airline deregulation, 1977.​

.

 

[SteveC]

Deregulation made flying much more affordable = success.

Deregulation required airlines to compete when they were not originally structured to work in that kind of environment, killing profits and taking pilots' wages and benefits with them = failure.

Depends which podium you're standing on.

 

[SlumTodd_Millionaire]

Deregulation was an utter failure and an embarrassment. Bob Crandall may have been an anti-labor scumbag, but he was one smart cookie.

 

[esa17]

I hate to break it to you guys but when they deregulated they weren't thinking about making happy pilots. Believe it or not, we're not the only people on the planet.

 

[Patrick]

It has certainly been a success with respect to making flying affordable for the American public. It has certainly not been a success with respect to lending any kind of stability to the industry.

Airlines have never been companies operated around efficiency (SouthWest being the only real anomaly), which was fine when the industry was regulated, as airline A didn't have to compete against airline B (at least on price). This promised profitability to all, however, it also promised to keep air travel something only the relatively wealthy could afford. This situation did, however, have the nice side benefit of making airline employees well compensated, as there was plenty of money to spread around beyond the shareholders and management.

I think the real problem with the current system is twofold. One, the fact that the majority of the Legacy carriers are still big, fat, dinosaur companies that only make decisions when they are forced to, and do so in a very reactionary nature. None of them seem able to look further ahead than 3 months. This does not lend itself to efficient operation.

However, the larger problem is that, in most industries when a competitor puts you out of business (by having a superior product and/or by being a better run company), you are out of the game. The natural business cycle will weed out the losers, and the winners will be left to compete against each other. This environment fosters efficiency, and the end consumer benefits. Ever notice that when you go purchase a new cooling fan for your computer, you have the choice of only 3 companies? The 4th company- who's fans either failed too soon, had excessive warranty claims, or were not priced to compete in the market- is no longer in business.

The whole concept of government bailouts is the biggest problem, in my opinion. It gives little incentive to any company to succeed, knowing that if they don't, they'll be given a second chance. And in this case, third, fourth, etc. Furthermore, the ability to shed debt and financial obligations during a restructuring allows the loser competitors to come back to the table for a second round, with an advantage that the remaining companies do not have. And thus this cycle continues, until at some point every company has been on both the "winners" and "losers" list.

The above cycle burns tax payer money, and, while it benefits consumers at face level with low fares, hurts the economy in the long run. In my opinion, it should either be a government run industry (which would include all the problems any government agency has, but allow stability) or let it float as a free market, which will decide the winners and losers once and for all.

 

[skydog]

Why do people refer to "deregulation" as though it is some kind of entity? Deregulation is a verb, not a noun. It was something that occurred, not something that exists.

That said, deregulation worked just fine. It did exactly what it was supposed to do: It allowed airlines to compete compete, succeed, (and fail) in the market place on its own merits. It made air transportation more accessible to the general public, and provided more choices for the consumer. It must also be said that it created more opportunities for pilots (and other employees) than ever existed during the regulated era. Following the act of dereulation, airlines expanded to more than twice their size, increasing the number of jobs. There are pilots at the majors today who have enjoyed entire careers of relative sucess and prosperity because of the act of deregulation

Thee "problem" was not with deregulation. It was with the incumbents who would not or could not adapt to free market competition. On this point, both management and labor share the blame. On the management side, you had guys like Frank Lorenzo who's entire strategy rested on cost-cutting and undercutting the industry; not realizing that such a strategy has practical limits beyond which you end up with a poor operation and a poor product. On the labor side, you had organizations like the IAM at Eastern, that simply refused to accept the changes in the competitive landscape, and demanded top dollar, regardless of whether or not the market supported it. Both parties shoulder their fair share of blame in this particular example.

From the perspective of a consumer, I can tell you that I can fly pretty much anywhere in this country, for what I consider to be a reasonable fare. That was the point of deregulation: market competitive fares and service options.

It's not the consumers' fault that the airlines can't figure out how to make money at it. Perhaps when the last of the "old guard" (airlines, management, and labor) is gone, the airlines who were born in the deregulated era will have better success.

 

[Orange Anchor]

http://en.wikipedia.org/wiki/List_of_defunct_airlines_of_the_United_States
http://en.wikipedia.org/wiki/List_of_defunct_airlines#.C2.A0Faroe_Islands

How do you make a million in the airline business? Start with about $10-20 million.

Even the money wizard, Buffet has remarked about the airlines.

"Lamenting his unprofitable purchase of stock in US Air, the normally sagacious Buffet quipped on the December 17, 2003 centennial anniversary of the Wright brothers’ historic flight, 'If I’d been at Kitty Hawk in 1903 when Orville Wright took off, I would have shot him down. Karl Marx couldn’t have done as much damage to capitalists as Orville did.'

 

[Trip7]

Why do people refer to "deregulation" as though it is some kind of entity? Deregulation is a verb, not a noun. It was something that occurred, not something that exists.

That said, deregulation worked just fine. It did exactly what it was supposed to do: It allowed airlines to compete compete, succeed, (and fail) in the market place on its own merits. It made air transportation more accessible to the general public, and provided more choices for the consumer. It must also be said that it created more opportunities for pilots (and other employees) than ever existed during the regulated era. Following the act of dereulation, airlines expanded to more than twice their size, increasing the number of jobs. There are pilots at the majors today who have enjoyed entire careers of relative sucess and prosperity because of the act of deregulation

Thee "problem" was not with deregulation. It was with the incumbents who would not or could not adapt to free market competition. On this point, both management and labor share the blame. On the management side, you had guys like Frank Lorenzo who's entire strategy rested on cost-cutting and undercutting the industry; not realizing that such a strategy has practical limits beyond which you end up with a poor operation and a poor product. On the labor side, you had organizations like the IAM at Eastern, that simply refused to accept the changes in the competitive landscape, and demanded top dollar, regardless of whether or not the market supported it. Both parties shoulder their fair share of blame in this particular example.

From the perspective of a consumer, I can tell you that I can fly pretty much anywhere in this country, for what I consider to be a reasonable fare. That was the point of deregulation: market competitive fares and service options.

It's not the consumers' fault that the airlines can't figure out how to make money at it. Perhaps when the last of the "old guard" (airlines, management, and labor) is gone, the airlines who were born in the deregulated era will have better success.

Wow wow wow:yeahthat::yeahthat::yeahthat: Make a sticky of this post

Deregulation created more airline jobs=success

 

[surreal1221]

More airline jobs?

You kidding me right?

Example.

Prior to deregulation (action verb): 1,000,000 solid, stable, never have to leave the career and retrain into another one jobs.

After deregulation (action verb): 4,000,000 jobs, but, 3,500,000 of those of us in the profession will need to find other work for a large portion of our "professional" life due to the lack of stability. So, less jobs that are honest - stable - career choices for Americans. FAILURE.

numbers are inflated to emphasize my point

So sure, more jobs = success, but when a large majority of the job holders are being put on the street, their companies closing shops, them being outsourced, and other factors that play into people losing their once stable career I really can not consider that a success.

When quality is traded for quantity, that's a huge failure in my opinion.

I say this knowing full right that I can't expect a JBU or Virgin America or Skybus pilot to realize the fact that the quality of the profession that they are enjoying for their own personal gains are on the backs of those who came before all of us in trying to protect our specific profession within the industry. I wouldn't expect a JBU, Virgin America, or Skybus pilot to recognize the negative impacts that occur by trying to preach about "Free market" and "Competitive prices," when they fail to even want to charge forward to improve the profession. We fail to realize that the free market is a myth. Considering that our largest raw good utilized in this industry is not a free market item, sure it is publicly traded - but it is managed by a large Cartel that controls the supply of said product. Free market? YGTBKM.

Further - No laborer should ever, EVER acknowledge they are paid too much.

No one is ever paid TOO much - even management *gasp!*. You are worth what you negotiate, and clearly some of us are happy with being paid paltry wages and allowing our segment of the industry to slip out of our grasps. All the while the quality of the profession and the ability to provide an attractive QOL for our families is nothing new to the rest of Middle Class America. Doesn't mean we have to accept it.

 

[tonyw]

If you define success as cheap airfares, then yes, it has been successful.

However, if you look at the level of service provided, the ability to get from point a to point b without delays, and the overall experience of flying it has been a failure.

Before deregulation, airlines provided food in coach. There was none of this buying snack packs and the crew having to figure out how to get your change.

There was no such thing as a charge for your checked bags.

There were no charges for booking over the phone. You could actually go to an office in the city and get a ticket.

There were far fewer delays.

Sure, if you define cheap airfares as success, then deregulation was successful.

For those of us who would value a better product over low low prices, it's been a failure.

I know the proponents of deregulation will say, but you can still get those things, you just have to pay for them.

Well, excuse me for thinking like a crazy man and saying, they should be part of the package and if Joe Twelvepack who lugs his clear plastic trash bags on can't afford to fly then, so be it. Tell him to take Greyhound.

 

[surreal1221]

No offense to Wal-Mart. . .but. . .

It's the Wal-Martification of the Airline industry.

 

[meritflyer]

Look at what deregulation has done for LUV. I personally love LUV. They make my business travels go smoothly!

Thanks deregulation!

(THESE THREADS GET OLD)

 

[ppragman]

Actually, just for the record, Deregulation is a noun. You can't say "I was deregulationing an airline yesterday". Or "I deregulationed the auto industry with the help of the senate." Also, it has noun qualities such as it being the target of verbs: "deregulation was/n't successful. Enough of that.

Look, deregulation kept prices low at the cost of thousands of airline jobs and many airline companies. The problem with deregulation is that it doesn't work in arenas where capitalism isn't allowed to function. If an airline goes under, it must be allowed to fail. If an airline is successful it must be allowed to be successful. With deregulation you find that the prices only stay low when the airlines don't have to be responsible for their own money. If the big legacies get into trouble, then the federales bail em' out, and that's why the system's so ####ed up.

 

[skydog]

This is what I refer to when I say "the old guard:" People who cannot accept that the airline competitive landscape has changed; that the way things were done in the past is not the way they are done today. The underlying assumption in this attitude is that the way things used to be are the way things ought to be. Not much I can say to that except to say that things happen the way that they should, just not necessarily the way we want them to.

The drops in service level reflects the market and the priorities of the consumer: If consumers REALLY wanted food in coach class, they'd pay for it in the form the the fare level required to provide such service. If people really wanted to check bags, they'd pay for that as well. I'd also say that the drops in service level reflect certain management failures as well.

Delays are a dual failure of managment and government. The national airspace system has a finite capacity. The fact that the ATC and NAS systems have failed to keep pace with demand is a failure that lays squarely at the feet of the government and the FAA. Where management is at fault is where they continually overschedule. As I said, the NAS capacity is finite. The airlines know that. Yet they continue to throw more and more airplanes in the air. You have to operate in a way that reflects the way things are, not the way you would like them to be.

Job security and stability. There is only one way to get it. And it doesn't happen through negotiated contracts, scope clauses, or whatever else. It comes by ensuring that there is always work to be done. And you do that by selling your product at a price that the consumer is willing and able to pay. You are not worth what you negotiate. You are worth what someone is willing to pay.

It's true that airlines are not stable now. I'm not sure they ever were, but it is irrelevant. Whst is relevant is that tHe airline unions have failed to recognize these facts and act accordingly. For example: They continue to hang onto seniority and longevity based systems. Those systems have their merits, but they also have their failings. They have chosen other priorities.

 

[skydog]

Actually, just for the record, Deregulation is a noun. You can't say "I was deregulationing an airline yesterday". Or "I deregulationed the auto industry with the help of the senate." Also, it has noun qualities such as it being the target of verbs: "deregulation was/n't successful. Enough of that.

Fair point. I stand corrected.

 

[Trip7]

If you define success as cheap airfares, then yes, it has been successful.

However, if you look at the level of service provided, the ability to get from point a to point b without delays, and the overall experience of flying it has been a failure.

Before deregulation, airlines provided food in coach. There was none of this buying snack packs and the crew having to figure out how to get your change.

There was no such thing as a charge for your checked bags.

There were no charges for booking over the phone. You could actually go to an office in the city and get a ticket.

There were far fewer delays.

Sure, if you define cheap airfares as success, then deregulation was successful.

For those of us who would value a better product over low low prices, it's been a failure.

I know the proponents of deregulation will say, but you can still get those things, you just have to pay for them.

Well, excuse me for thinking like a crazy man and saying, they should be part of the package and if Joe Twelvepack who lugs his clear plastic trash bags on can't afford to fly then, so be it. Tell him to take Greyhound.

If you want a meal and no checked bag fee buy a first class ticket. Hey first class ticket prices today are the same as coach prices back in the "good ole days" right?

 

[SlumTodd_Millionaire]

On the labor side, you had organizations like the IAM at Eastern, that simply refused to accept the changes in the competitive landscape, and demanded top dollar, regardless of whether or not the market supported it.

You need to do some more studying before you start crucifying the IAM about EAL. Charlie Bryan and EAL IAM were not demanding "top dollar." They were refusing to accept some of the most draconian paycuts and working conditions in industry history. That is why ALPA decided to back them and sympathy strike, even though Jack Bavis and the rest of the ALPA reps really didn't care for Bryan or the IAM.

Deregulation created more airline jobs=success

Bull----. Deregulation didn't create more airline jobs. A general economy-wide boom during the 80s and 90s created the airline jobs, and that would have taken place regardless of whether deregulation happened or not. And then there is the argument that surreal is making about the quality of the jobs. Much like the WalMart situation: lots of jobs created, but the jobs are practically worthless and have replaced better jobs that were destroyed.

 

[LoadMasterC141]

Yup....this pretty much sums it up!!!

You (beep)ing academic eggheads! You don't know (beep) . You can't deregulate this industry. You're going to wreck it. You don't know a (beep) thing!

Robert L. Crandall, CEO American Airlines, addressing a Senate lawyer prior to airline deregulation, 1977.​

.

Isn't he the same guy that told that absolutely ridiculous story about guard dogs in a warehouse on the CNBC documentary?

Deregulation.....it happened.

 

[Trip7]

You need to do some more studying before you start crucifying the IAM about EAL. Charlie Bryan and EAL IAM were not demanding "top dollar." They were refusing to accept some of the most draconian paycuts and working conditions in industry history. That is why ALPA decided to back them and sympathy strike, even though Jack Bavis and the rest of the ALPA reps really didn't care for Bryan or the IAM.



Bull----. Deregulation didn't create more airline jobs. A general economy-wide boom during the 80s and 90s created the airline jobs, and that would have taken place regardless of whether deregulation happened or not. And then there is the argument that surreal is making about the quality of the jobs. Much like the WalMart situation: lots of jobs created, but the jobs are practically worthless and have replaced better jobs that were destroyed.

Deregulation gave way to the LLCs since you could set your own prices right? Without deregulation would SWA, JBU, Air Tran, Allegiant, Alaska, Spirit etc be around?

On the other hand, if we stayed regulated would the 80s and 90s boom led to new airlines popping up to compete based on customer service since price was fixed? If that would have been the case then you're absolutely right.

 

[SlumTodd_Millionaire]

Deregulation gave way to the LLCs since you could set your own prices right? Without deregulation would SWA, JBU, Air Tran, Allegiant, Alaska, Spirit etc be around?

On the other hand, if we stayed regulated would the 80s and 90s boom led to new airlines popping up to compete based on customer service since price was fixed? If that would have been the case then you're absolutely right.

It's entirely possible that the new carriers wouldn't have been created, but the demand for air travel would have been largely unchanged. The existing legacy carriers (known as "trunk" carriers during the regulation days) would have simply grown that much bigger to accommodate the increased demand, which would have actually created more and better jobs. The so-called LCCs employ fewer people to produce the same revenue because of a leaner structure, and they pay less. Pointing to the creation of a bunch of LCCs, most of which have failed since deregulation, isn't a great way to point to a growth of good jobs. It's the exact opposite.