When I hear that, "Fifty percent of air travel in the United States is on airlines that are in bankruptcies or are threatening to file bankruptcy," I couldn't agree more that we need to reexamine deregulation.  Very interesting article.  Thanks Adelaida!

Source: PDP Web Site
Author: Samuel L. Higgenbottom

United Airlines, in its desperate search for ways to save money, is now reported to be ending a venerable service -- the free skycap. This is but one more example of how much the industry has deteriorated since the airlines were deregulated in 1978.

Largely gone is in-flight food service. In some cases pillows, blankets and other in-flight amenities no longer exist, although attempts are being made to restore them at added cost to the passenger. Cabins have become crowded and uncomfortable, check-in for flights is a time-consuming, unpleasant experience, baggage delivery is often slow (or the bags missed the flight) and many of the airlines' customer contact employees, suffering from large and repeated reductions in pay and benefits, are unhappy, and it is reflected in their attitudes.

Fares fluctuate wildly and are still irrational. For example, to travel from Fort Lauderdale, FL, to New Bern, NC entails a plane change at Raleigh, with the flight from Raleigh to New Bern costing over twice the cost from Fort Lauderdale to Raleigh -- although only one-seventh the distance. That sort of cost disparity applies on too many of the low-traffic-density segments.

And hardly a day goes by without other signs of distress in the industry. Articles cite United Airlines' flight attendants' protests to save their pensions, and their threats of random strikes. Other articles describe the contract negotiation impasses at Northwest Airlines and Alaska Air, with threats of mechanic and ground employee strikes. Delta Airlines continues to threaten bankruptcy unless its employees grant still further concessions in pay, benefits and work rules.

In Dallas, Southwest Airlines is seeking to overturn the Wright Amendment, which prohibits it from extending lower-cost service to other cities to the detriment of American Airlines' higher-cost service.

The advocates of deregulation -- of let the marketplace prevail -- say all of this turmoil will eventually result in an efficient air transportation system that is economical and will serve the public well. Their claim is that it is taking longer than expected because of poor airline management, union truculence, the 9/11 terrorism attacks, the recession of the early 1990s, the high oil prices, etc.

It has been 27 years since deregulation was enacted. How long do they think it will take to get some good results?

They also point to Southwest, JetBlue and AirTran as properly run airlines with sensible costs that can take up any slack created by failure of one or more high-cost legacy carriers.

However, all of that is belied by the history of American civil aviation. For the 50 years before the 1978 deregulation, civil aviation was a stable, well-run industry. Fares rose at less than the inflation rate, and in constant dollars they actually decreased. Fares were directly related to average seat mile cost and to the distance traveled. Safety, passenger comfort, flight availability and on-time performance continuously improved.

Yes the industry then, as now, went through periods with lessened demand and soaring fuel costs, but never was a major airline forced into bankruptcy or liquidation.

And can JetBlue, Southwest and/or AirTran really take up the shortfall in capacity if a Delta and/or United and/or American fails? In December, 77.5 percent of all airline capacity was provided by the six legacy carriers:

American Airlines -- 18.7 percent
United Airlines -- 15 percent
Delta Airlines -- 14 percent
Northwest Airlines -- 9.8 percent
Continental Airlines -- 8 percent
U. S. Airways -- 5.5 percent

Only 12.5 percent of capacity was supplied by the three low cost carriers:

Southwest Airlines -- 8.8 percent   JetBlue -- 2.2 percent   AirTran -- 1.5 percent

Southwest, with its single type of plane and only one class of service, could only partially replace any of the legacy carriers, and then only with a very large fleet expansion, greatly increased costs and probably union problems. It could not add fleet types and added classes of service and still have a viable low-cost business model.

For JetBlue or AirTran, an expansion to six to 10 times their present size is simply not doable in a reasonable time frame at a reasonable cost.

It is time to seriously re-examine deregulation. Every major airline that existed in 1978 when deregulation was enacted has been liquidated or is operating under bankruptcy protection or is threatening bankruptcy. Fifty percent of air travel in the United States is on airlines that are in bankruptcies or are threatening to file bankruptcy.

Over 400,000 employees have been affected with pay and benefit reductions or job losses or relocations. Still more are threatened. Many retiree pensions and health benefits have been reduced and/or transferred to the Pension Benefit Guarantee Corp. of the federal government with more transfers probable. It is already underfunded.

It really is time to acknowledge that the air transportation industry is a quasi public utility and requires some regulation to assure all are well served. Our increasingly interdependent world and individual national economies are absolutely dependent on safe, reliable, comfortable and reasonably priced air transportation. Let's demand a national air transportation policy and a plan for implementation that provides it.

[Samuel L. Higginbottom is a former president of Eastern Airlines. He was also chairman and chief executive officer of Rolls-Royce, Inc. and is chairman emeritus of Columbia University.]