We Reregulate The Airlines?
Part 8 : Why some people
advocate reregulating the airlines? But would it improve
This air mail stamp,
issued in 1968, commemorates the 50th anniversary of the
inception of air mail service in the US in 1918, a watershed
event that marked the start of America's aviation industry.
Part of a series on US airline
regulation and deregulation
- see extra articles listed in the right hand column.
Parts three, four and five of
this series detail how airline regulation was a failed
experiment, and record the benefits enjoyed by us all subsequent
But the airline industry
remains imperfect. Some people believe the solution lies
not in completing the deregulation process which still lurks in
the background, and which continues to distort and detract from
full free market economics (see parts six and seven), but rather
in re-regulating and instituting a new series of controls on
These well-meaning do-gooders
assure themselves that new regulations would create a better
world for us as passengers and the airlines as business
But would this really be true?
In the final part of this series, we look at - and answer - some
of the arguments offered in favor of re-regulating the airlines.
The Ongoing Call for
Re-Regulating the Airlines
It is hard to read too much
about the airline industry without finding someone equating some aspect of what they claim to be problems within
the industry as being due to de-regulation and concluding with a call for re-regulation, with the implied hope
being that re-regulating the airlines would solve the specific
problem in particular, and all other issues in general too.
Even Travel Insider readers
have on occasion advocated re-regulating the airlines. For
example, a comment on
this blog article claims
The truth is out! "Travel
Insider" warns against promoting airline re-regulation! After
all, everything the airlines do is perfectly OK! If they were
regulated they might even thank customers for their business
rather than slap all customers in the face every time they fly.
A comment on an
earlier article about airline deregulation says
I suspect you won't be
willing in the later articles to admit that deregulation, as
practiced by recent administrations has some negatives: much
less on-board comfort (which can actually have health
consequences) and the domination of certain markets by one
airline leading to much higher prices. If we look at regulation
in less ideological terms it would be easier to find a
compromise that allows business flexibility while giving an
appropriate minimum level of service.
Go search Google and you'll
find literally hundreds of thousands of webpages on the subject
(I searched for the query 'should
the airlines be regulated again' and got 436,000 results).
Is There a Problem that New
Regulation Could Solve?
It is true that, by some
measures, the quality of the overall air travel experience has
slipped over the last several decades, although one wonders how
much of our perception of 'the good old days' is a true accurate
understanding of what travel was like in the days before
deregulation. Are airline seats truly smaller than before
(answer = No, the seats aren't smaller, but we are bigger; this
shows Americans in 2002 are an inch taller and 25 lbs heavier
than in 1960)?
Let's look at some of the
arguments offered in favor of re-regulating the airlines and see
if they hold up to inspection.
Claim #1 :
Re-regulating the airlines couldn't possibly make things
worse than they are, and might make things better. The
airlines have had their chance and failed at it, so now it
is the turn of regulation again.
This claim is not based on
fact, but instead uses two rhetorical 'tricks'.
It first uses a rhetorical
device where the person starts off with an unsubstantiated
assumption (that things are so bad now they couldn't possibly be
worse) and then uses that unsubstantiated assumption as a reason
to support their argument (which is, in turn, empty and lacking
This first rheorical device
is repeated again in the first part of the second sentence -
'the airlines have had their chance and failed at it' - how so?
In what way have the airlines failed? Are lower fares and
more flights a failure? If so, I'd rather have more
failure than less!
The second rhetorical device
is to take a universally accepted concept and then to misapply
it - in this case, the concept of 'turn and turn about' as being
fair, and using it to suggest that the nation's industry should
exist in a cycle of so many years of government control followed
by so many years of freedom, and then a return to government
It is hard to respond in
detail to this double-barreled blast of rhetoric, because while
rich in rhetoric, there are no facts to debate or rebut.
In what way could things not
be possibly worse than they are now? Oh - don't get the
airlines started on that! They could make things massively
worse - like trebling airfares, halving the number of flights,
flying to fewer cities, and adding more restrictions. Oh -
doesn't that sound familiar? Yes, I've just described what
air travel was like prior to deregulation.
Furthermore, the concept of
some sort of cyclical series of regulated then deregulated then
reregulated industries makes no sense whatever.
Claim #2 :
It should be illegal for airlines (ie Spirit Airlines) to
charge for carry-on bags. Free carry-on bags should be
a basic right of all passengers, and we need the government
to ban this.
To answer this claim, it is
first necessary to understand that Spirit Airlines does not
charge for all carry-on bags. If you bring a moderate
sized carry-on bag onto a Spirit flight and stow it under the
seat in front of you, the bag remains as free to carry on as it
has always been. It is only if you bring on a big bag that
you want to place in the overhead bins that you become liable
for their fee.
Maybe we as passengers
should have a right to bring some carry-on onto the plane with
us for free, but that right is granted by Spirit allowing us to
take a moderate sized bag. Beyond that, what is unfair
about 'user pays'? If it is of value to you to bring a
larger bag on board, why shouldn't you pay for it - especially
if the alternative is paying to check the bag?
And if the thought of paying
for a big roll-aboard bag onto your flight is that objectionable
to you, why not go fly a different airline?
Claim #3 :
The airlines have been losing billions of dollars a year.
Doesn’t that show the unregulated marketplace is a bad idea?
Shouldn’t we reintroduce regulation so that airlines can
earn a fair profit in return for providing a decent service
– currently it seems the worst of all possible worlds – the
airlines are losing money and we’re getting bad service.
Isn’t deregulation a lose-lose proposition for everyone?
This cogent seeming
suggestion is wrapped around a couple of misperceptions.
First of all, it is true
that in the regulated era the government through the CAB
accepted that it was fair, right and proper for airlines to earn
a 12% annual return on their capital. In simple terms, if
the airlines were earning less than that, the CAB would agree to
fare increases to allow the airlines to return to this 'fair'
level of profit; if the airlines were earning more than that,
the CAB would not agree to fare increases and might even insist
on fare reductions.
But - even in the fully
regulated environment prior to 1979, the airlines were not
consistently making money. Some years they'd lose money,
and they almost never got anywhere near a 12% return, even with
all the regulatory 'help' the government could offer.
The reason for this is
simple, and forms my second response. You can't regulate
good management. Regulation protects bad management, it
does not promote good management.
Furthermore (here comes
response number three) you can't regulate the price of jet fuel,
you can't regulate the health of the economy in general, you
can't regulate the impacts of security scares and foreign wars,
and all the other external factors that impact on airlines and
their profitability. Who is to say how much the losses
since deregulation have been the 'fault' of deregulation and how
much has been inevitable due to external uncontrollable events?
It is indeed true that the
airlines have struggled to be profitable, but this struggle is
not new. It is a struggle that has been occurring ever
since the first commercial flight, with varying degrees of
success. And, in the last few quarters, even without the
help of new regulations, the airlines are swinging back into one
of their periods of substantial profitability.
Let's also carefully
understand what this claim is advocating. It implies that
we have an obligation to ensure the profitability of the
airlines. This is a nonsense statement. We have no
obligation to ensure the profitability of any for-profit
company, and if you feel to the contrary, you are happily free
to mail off donations to any company you wish. But please
don't mandate the rest of us should also have to mandatorily
join in this corporate contribution scheme.
Claim #4 :
It is grossly unfair that a person has to pay $100 or
more to change their flights. The government should
regulate such unfair business practices.
One can agree – and disagree
– that this is grossly unfair. When you make a change to
your airline reservation yourself, through the internet, then we
all know that the millisecond of time that it took for a
computer to flip a bit and electronically switch you from one
flight to another has cost nothing to no-one.
But – and all these simple
seeming issues have but’s – the trick is to think them through
fully and fairly…… two thoughts.
First, no-one forced any of
us to buy the ticket with the $100 change fee. If we
wanted to avoid the change fee, we should have bought a more
expensive ticket up front with a lower or zero change fee.
The people complaining about the change fee are the people who
gambled they wouldn’t need to make a change, and lost their bet.
Second, while the cost of
the change fee is minimal, the value to us is great. Why
should the airlines be forced to give us a thing of great value
And – think it all the way
through. If the airlines weren’t able to make good money
from change fees, they’d have to up the price of all tickets to
compensate for the revenue they were losing. In other
words, whether we thought we’d need a change fee or not, whether
we make a change or not, we’d all be paying an extra premium,
just in case we might need it.
Most of us surely prefer
having the freedom of choice in terms of the ticket price and
conditions associated with it that we select. But once
we’ve made our choice, we should accept the consequences.
Claim #5 :
There should be a law that requires the airlines to give
us a decent sized seat, comfortable legroom, and enough
overhead space to store our carry-ons. These are
fundamental essentials that should be built in to any and
every ticket, no matter how cheap it might be priced.
I can answer this in two
words. First class. If you want such amenities and
benefits, then you should be prepared to pay for them. Go
ahead – buy yourself a first class ticket, and comfort yourself
with the thought that your first class ticket today is costing
you, in constant dollar terms, about the same as what a coach
class ticket cost before deregulation.
But please allow the vast
majority of Americans who have chosen to accept the too-small
seat and the bad service, as a tradeoff in return for a monetary
bargain that makes air travel the cheapest means of travel in
the country today. There’s no cheaper way to travel in the
US than by air, and even after allowing for all the hassles, if
you’re traveling any sort of distance more than a few hundred
miles, there’s no more convenient way to travel either.
Yes, there’s a lot to
dislike about air travel today, but this is the Faustian bargain
we all make when we buy the cheapest available fare – we’ve
decided to accept everything the airlines throw at us in return
for a fast, safe, low cost and reasonable travel experience.
Claim #6 :
If the airlines were regulated again, we'd get better
service, like we used to have back then.
'Like we used to have back
then'? The memory plays tricks
on one. Think back to what flying was like in the mid
1970s and before. Do you remember? How many of the
people making such claims were flying in the 1970s (and how many
of them are still flying today)?
Well, do you remember, for
example, that there was almost no overhead space back then.
Do you remember that there were no frequent flier programs?
Do you remember the much higher cost of your flight? Do
you remember there was no seatback entertainment system for you?
And if there was a movie, it was on a screen at the front of the
cabin and you got to wear those appalling painfully
uncomfortable stethoscope type headphones with dreadful sound?
And the seats weren't really any bigger, either - the 737 and
before it the 707 (which had the same size fuselage) have always
had six seats per row. Maybe the seats were a bit further
apart, but they were also thicker, with the extra seat padding
taking up the extra space for no good purpose.
Bags would still get lost
back then (possibly even at greater rates due to less automation
in the systems - do you remember the stories of the checkin
agent getting the wrong tag and eg putting a IAD tag on a bag
instead of the adjacent IAH tag, etc) and were harder to trace and return to their
owners. Flights would still be delayed or cancelled.
Ah yes, the good old days
indeed, right? Still keen to return back to those days?
Okay, so that is unfair,
because so much has changed. Ah - but part of that change
is also a change in service standards. Let's think some
more about the 'good
service' we used to get. Maybe that was true, maybe it
wasn't, but the drop in service standards is not unique to the
airlines. It has happened in every segment of society -
should we regulate the corner convenience store? Should we
set maximum line lengths in the banks? Should we make full
service gas pumping, complete with a free windshield clean and
oil level check mandatory?
The most relevant reason
you almost never see full-serve gas stations these days is
because people overwhelmingly decided they didn't want to pay
the extra cost to have someone pump their gas for them.
Our expectations for service have diminished, as has our
willingness to pay for it.
This is true in most areas
where service has been reduced. Companies - whether they
are airlines or any other type of company - would much rather
compete on the basis of service than on the basis of price.
That is simple marketing. But the American public has
overwhelmingly shown their unwillingness to pay for extra
service, for extra amenities, and for extra features.
Travelers say they want better service and everything else, but
when it comes to making a choice, they almost always choose the
lowest cost option, not the best service option. That is
the real reason why airlines these days give so little - because
we, their customers, have shown them overwhelmingly that we
don't want to pay for anything more than the barest basic no
Indeed, one of the American
carriers - Alaska Airlines - had a competitive problem. It
decided it would continue to provide better services than the
other carriers it was competing with (primarily United
Airlines), but charge the same low fares. The public
accurately perceived that Alaska Airlines (AS) was the better
airline, but then inaccurately guessed that because it was
better, it was probably more expensive than UA, and so they
would buy a ticket on UA. AS was losing business to UA
because it was providing a better service! How crazy is
After a period of running
ads saying, in effect, that they were better but not more
expensive, they gave up trying to promote that message and
simply cut back their services.
One more thing about the
evolving service standards and the 'good old days'. Back
then, people would get dressed in their best clothes to take a
flight. Ladies would wear nice dresses and men would wear
suits and ties. This now seems antiquated and amusing, but
surely it goes with the territory - it is harder to give respect
to someone in a dirty pair of trainers than it is to someone
well dressed and well mannered. Respect is earned, it
can't be regulated.
Claim #7 :
While of course we should leave the airlines largely
de-regulated, there are clearly some things that are too
important to risk leaving to the airlines to properly do by
themselves. Complete re-regulation isn't the answer,
but a few careful and limited controls would improve an
industry that currently desperately needs improvement.
This sounds like a very
moderate sensible statement, doesn't it. It sounds
statesmanlike, thoughtful, and also hints at finding a
compromise somewhere between the extremes of a totally
deregulated 'Wild West' and a totally regulated Soviet style
economy (remember Aeroflot prior to Russian independence -
surely the ultimate example of what total regulation would do to
the airline industry).
But the road to hell is
paved with good intentions, and (to add another metaphor) such a
statement represents as the thin end of the wedge. Note
the statement is totally lacking on the specifics of what should
be regulated - or possibly it might vaguely refer to 'safety'
(already regulated) or 'consumer protection' (also already
regulated, but sadly a great example of how ineffective
regulation can be).
It is hard to rebut such a
non-specific statement, because of its vagueness.
The Cost of A Roomier Seat
One of the most commonly
cited bad things that should be re-regulated is the inadequacy
of airline seating.
First of all, airline seats
are no smaller today than they were prior to de-regulation. The measure of an airline
seat encompasses two main considerations. The width of the
seat (ie 'elbow room') and the space between seats (ie 'leg
As regards seat width, this
has been steady for decades. All 707, 727, 737 and 757
planes have the same diameter fuselage and all these planes, dating from the first 707 which
flew in 1957, have had three seats on either side of a single
aisle. The seats can't be made any wider without making
the aisle narrower, and the aisle is already as absolutely
narrow as possible. Other airplane interior designers have
perpetuated the seat dimensions, and nearly every coach class
seat, everywhere in the world, has between 17" and 18" width.
As regards seat pitch, this
is a bit harder to evaluate in terms of effective net seat room,
because if you have two seats both with the same 31" pitch (the
space between the start of one seat and the start of the next
one ahead or behind it), but with one seat have a 2.5" thick
seat back and the other having a 1.5" thick seat back, you end
up with an extra inch of leg room/knee space. The
effective/perceived amount of leg room also depends on things
such as how the seat pivot/reclines.
There's been very little
reduction in net leg room in seating either.
The most significant impact
on seat space is not the seat, but us. We are growing
taller and, alas, getting heavier too. This
shows Americans in 2002 are an inch taller and 25 lbs heavier
than they were in 1960, and it seems the trend is continuing
subsequent to the 2002 data.
Anyway, whether it is
anyone's 'fault' or not, let's look at the cost implications of
getting bigger seats onto planes. What would it cost to
get a seat with more shoulder room and more leg room?
That means going from six to
five abreast seating, and taking out some rows of seats.
Let’s say, on a typical plane currently with about 30 rows of
six seats we go instead to 27 rows of five seats. That should
give us an extra 3” of legroom.
What does this mean for the
fares? The airline now only has 135 instead of 180 seats.
So instead of selling tickets at perhaps $250, to get the same
return it now must sell tickets at $333. This simple tweak
to seating has increased the cost per ticket by a third.
Lessons from the Cost of a
And now, here is the catch.
Hands up, everyone who would travel as much as before, and
happily pay an extra $83 per flight, so as to get a slightly
bigger seat. No-one puts their hands up.
This is the catch. The
public has repeatedly been given a choice between better and
worse - indeed, for a while it had the amazing choice between
more leg room (with American Airlines and its 'More Room in
Coach' product) and less room (all other airlines), with AA's
roomier coach class seating costing no more than its competitors
with the crowded seating we all hate to much.
Did the traveling public
flock to AA, eager to get the seat spacing they so desperately
want and complain about, without even having to pay any cost
premium to receive it?
Ummm - no. American
Airlines detected no visible gain in market share at all, and so
ended up discontinuing their program and returned the extra rows
of seats to their planes.
So while we, the traveling
public, definitely want more seat room, it seems that not only
would we be unwilling to pay for it, we're not even willing to
switch airline loyalty to get it for free.
So by what stretch of good
sense can we say we should regulate and insist the airlines give
us more legroom, at a massive extra cost, if we've shown that no
matter what we say, in reality, we don't really care, and most
of all, we're absolutely unwilling to pay any premium for this
This gets us to the biggest
problem implicit in any re-regulation of the airline industry.
The Biggest Problem of
Conveniently overlooked or
ignored in all calls for reregulating the airline industry is
the unavoidable ugly reality that any and every bit of
regulation will have a cost associated with it. Regulation
does not, can not, and will not give us something for nothing -
quite the opposite, the inefficiencies of regulation generally
mean we get less provided at greater cost.
Two problems arise with a
return to regulation and the costs that would unavoidably be
associated with the arguably improved air travel experience that
new regulations might seek to create.
The first is that no matter
how much the traveling public may say it wants an improved air
travel experience, it has voted with its pocket book and clearly
shown it will not pay for any improvement whatsoever.
The second is that the few
people who are willing to pay for a better travel experience
already have the choice and option to do so - it is called first
Yes, that's right, first
class. Most of the complaints about current airline
practices are minimized or resolved if you simply fly first
class. So if this is what you seek, please go ahead and
buy a first class ticket, but please allow the rest of us the
freedom to make our own choices, and to - in most cases -
unhappily accept a bargain priced coach class fare complete with
ever fewer associated amenities and inclusions, and ever more
rules, restrictions and potential penalties.
If we regulate the airlines
and demand they change all manner of things in the process, the
bottom line is that we'll all end up paying first class fares
(just as used to be the case when the airlines were regulated
prior to 1978).
And when we all see our
fares double, we'll cut back on air travel. And the
airlines will then go through their latest massive loss-making
cycle, they'll cut back further on flights, they'll need to push
fares up even higher, and before too long, we'll have an
industry in a crisis to which there is only one solution - the
same as that crying out for attention in the mid 1970s -
deregulation once more.
The Biggest Assumption of
The biggest assumption of
people who advocate regulation is that the government knows how
to run an airline better than the airlines themselves, and the
government knows better than we do what is 'best' for us as
The people who believe this
probably work for the government at present, and come knocking
at our door, and greet us with those fateful words 'I'm from the
government and I'm here to help you'.
All joking aside, what
possible support can any regulatory advocate claim to show that
the government can do a better job of airline management than
the airlines themselves can do? The government's earlier
attempt at airline regulation was a failure. How/why would
they do better this time around?
In fact, there are reasons
to fear the government would do much worse these days. One
of the problems of managing the airlines via a regulatory
process rather than via the free market is that the regulation
writing process itself is far from rational, sensible and
altruistic. Government regulation-making is very
susceptible to political influence and pressure. All sorts
of vested interests will cluster around the regulatory
proceedings, trying to get the best possible share of the
process, with no thought for whether doing so will also be best
for the airlines and the public they serve.
Mixed in with the venal
self-interest lobbying groups will be other groups that are
almost as dangerous and harmful. These are the well
intentioned but ill informed groups that wish to create more and
more obstacles and complications to airline operations.
A good and recent example of
how all such special interest groups can create an unstoppable
force that results in ridiculous and costly regulation which
costs the airlines while providing no value to the traveling
public in return is the recent increase in pilot qualification
standards. Previously pilots could fly a commercial jet
with 250 hours of appropriate flying experience. This has
now been increased to 1500 hours minimum flying experience.
Please see our article about how this
unnecessary increase in pilot qualifications brings no
measurable benefit in safety, while strengthening the hand
of pilots when it comes to negotiating future wage increases.
Making the airlines
accountable to regulations driven by government lobbyists and
variously ill informed and/or self-promoting pressure groups,
instead of holding them accountable to the marketplace and us as
their customers/passengers will result in a dysfunctional and
ever-growing set of increasingly ridiculous regulations that
will destroy the effective affordable operation of our airlines.
It is difficult to
dispassionately and absolutely consider the validity of
re-regulating some or all aspects of the airline industry,
because at its heart, the issue is one of philosophy. If
one believes that life is best enhanced in a relatively free
marketplace with a minimum of government participation, one
seeks reasons to avoid airline (and other) regulation. If
one believes that governments rather than narrow vested
interests provide the best way of managing the living of one's
life, one finds reasons to regulate the airlines and most other
It is hard to find a
consensus middle-ground between these two opposing world-views.
But in the case of the
airlines, we have some degree of demonstrated outcomes already.
We've seen what has happened in both a regulated and an
unregulated environment. Regulation didn't work
the first time, which is why it was abolished. What
reason is there to think it would work a second time - sure, we
might be able to get things more or less sensibly defined to
start with, although I doubt that (all the pressure groups,
vested interests, lobby groups, etc), but what about the
evolving world subsequently? The previous regulatory
regime got so out of touch with its marketplace, both in terms
of authorizing legislation and actual regulatory practice, that
the only solution was to abolish it. How to prevent it
Our society is based on the
assumption that, in general, less government is better than
more (the opposite assumption is what is known as somewhere
between socialism and communism and we all know what happened to
that form of government).
There needs to be a clearly demonstrated reason and
benefit to returning to regulation - what is it?
Some things are obvious and
quantifiable. For example, do you remember
the 'good old days' when you could arrive at an airport 30
minutes prior to departure, rush through security, walk to the
gate and get straight on a plane with your pre-printed boarding
pass. Nowadays we're being 'recommended' to turn up at an
airport some ridiculous time in advance of the flight's
scheduled departure time, and are told if we're not at the gate
30 minutes prior to departure and on the plane 15 minutes prior
to departure (actual numbers vary from airline to airline), our
reservation will be cancelled.
The First Class Solution
Most people who advocate
re-regulating the airlines seem to share two characteristics.
The first characteristic is that they fly, if at all, in coach
class. The second characteristic is that most of their
motivation for re-regulating the airlines seems to be in the
idealistic belief that by doing so, the airlines would become
friendlier and nicer, and that the quality of the air travel
experience would travel in various important ways.
Unstated in all such
complaints is a belief that making air travel 'better' would
somehow be possible at no additional cost to the people flying.
The current situation isn't
deregulation - it is semi-regulation. Some things are
regulated, some are not. And some things probably should
be regulated - safety issues and passenger rights issues.
Some things should not be
regulated - for example, the government propensity to create
what I'll call an 'unregulation' and to give a group of airlines
immunity from anti-trust laws. It was appropriate, when
the industry was fully regulated, that the airlines be protected
from other unintentional rule breaking as part of complying with
the direct regulations affecting their business. But now
that the regulations have largely disappeared, so too should the
'get out of jail free' cards.
If it ain't broke, don't fix
it. Is the airline industry currently broke? And if
it is, would regulation fix it.
Talking about broke, perhaps
the first consideration should be financial. While no-one
owes the airlines a living, it is true that a healthy airline
industry is probably desirable to one that is unhealthy.
But if you are paying $200 for a ticket to an airline that was
struggling to break even (but still flying on time, observing
all safety and maintenance requirements, etc) would you
voluntarily choose to pay another $50 as a contribution to the
airline's profit, so it can pay some federal taxes and
distribute a dividend to its shareholders? Airlines are
not registered charities, and it is for them to do what they
need to do in order to trade profitably, we have no more
obligation to support them than we have an obligation to support
any other failing business.
was not a guarantee of airline profit prior to 1978, and
would not guarantee airline profits now. Bad airline
management and negative external factors (the economy, wars,
fuel prices, terrorist attacks, etc) will impact on any airline,
whether or not it is regulated. Who is to say how much of
the airline losses are the 'fault' of deregulation and how much
would have happened anyway?
What would re-regulation be
intended to achieve? It won't be free!
Stopping airlines from
overselling flights so people are never bumped off flights?
This is close to a non-problem at present, and we all benefit
more than we suffer from it. Most times, if a flight is
oversold, sufficient people rush to volunteer to be bumped in
return for fair to generous compensation. See overbooking
series. Only about 1 passenger in 10,000 is involuntarily
denied boarding. And if you stopped airlines from
overselling, they would have to increase the fare paid for
'If the airlines were
re-regulated, we'd have better service'. This statement is
often made in vague terms, and it isn't clear if the person
making the statement is thinking of 'better service' in terms of
hot panted young stewardesses, or being able to breeze through
security, or what. But those hot panted stewardesses -
they're not going to come back again, and security is outside
the airlines' control already.
Maybe they just mean that
the flight attendants would be more polite and pleasant.
Excuse me - you are going to try and regulate politeness and
pleasantness? In actual fact, if you reregulate the
airlines, you'll almost certainly end up constraining the
ability of airlines to discipline and fire their staff, and so
the staff will become less accountable rather than more.
Besides which, it has been my experience that most flight
attendants are moderately pleasant and friendly; it is only when
they meet a rude passenger that they unload.
You can't legislate good
service. If you could, then government departments would
all be staffed by brilliantly service-sensitive individuals,
So what exactly would be
better service? Fewer delayed flights? But most
flights are delayed for reasons outside the airlines' control
such as air traffic control delays and congestion, and it is the
government, not the airlines, that has been holding back on new
improved air traffic control systems.
Maybe shorter lines at
checkin is what these people mean. But if you want a short
line, you can book a first class ticket, or become a premium
level frequent flier, and get access to the VIP line already.
Indeed, some airlines are now selling access to the VIP checkin
lines as another optional extra. This isn't something that
needs regulation, and if it were to be regulated, who is going
to pay for the cost of more checkin stations at the airport, and
more people to man them? Will the airlines just do this
for free? Or will the cost of our tickets increase to
cover these costs?
Safety? The airlines
are safer than they've ever been, and 13 times safer in 2009
than 1969, and most safety related issues
are already regulated. Repeated predictions by various
pressure groups that each and every bit of deregulation would
result in the airlines abandoning all safety standards have
every time been shown to be completely false.
Free meals? Meals have
never been free, they used to be included in the price of a
ticket, and now they aren't. I don't know about you, but I
seldom ate the airline food when it was provided at no extra
charge, and I am perfectly willing to pay $5 - $10 if it buys me
a decent meal; I'd rather pay money for a decent meal than get
something I'm not going to eat for free. If the airlines
are mandated to start serving food again, ticket prices will go
Partial re-regulation -
'water finds its own level' - you can't regulate half an
industry, because that creates anomalies and loopholes - like
savings and loan (FDIC),
Why and How Did Deregulation
The Civil Aeronautics Board
(CAB) had been in charge of regulating all interstate air
transportation, setting fares, routes and schedules. Airlines
that flew only intrastate (ie only within one state) were
exempted from such regulation (but were subject to regulation at
a state level).
The CAB was obliged to
ensure that airlines earned a fair profit - a very generous 12%
return on investment was the target, and in general, it did this
by discouraging competition and by setting prices sufficiently
high to ensure the airlines traded profitably. Although the
aviation industry was evolving at a tremendous rate, with new
types of planes with new types of capabilities, and therefore
opening the door to new types of air service, the CAB was slow
to respond and react.
For example, World Airways
applied to begin a low-fare New York City to Los Angeles route
in 1967; the CAB studied the request for six and a half years
only to then dismiss it because the record was 'stale'.
Continental Airlines began service between Denver and San Diego
after eight years only because a US Court of Appeals ordered the
CAB to approve the application.
Slowly there was a mounting
level of dissatisfaction at the CAB's activities. The airlines
themselves - with profits that were generally guaranteed - were
not very aggressive at seeking change, although even they felt
increasingly constrained by the slow moving CAB and its
inability to respond to almost any type of request. The CAB
generally did not allow airlines to add new routes (none had
been added since 1969 and the airlines had essentially given up
applying), but also they would not allow the airlines to
discontinue previous routes that no longer made sense.
The traveling public was getting increasingly unhappy with ever
more expensive airfares, and while the airlines were delighted
to be able to fly planes profitably and only half full, the
public was starting to come to realize that if more seats were
sold per plane, maybe the fares could drop. The antics and
successes of Southwest Airlines in Texas and PSA in California
was also demonstrating, in a very clear manner, that an
unregulated airline could provide a high quality service at
about half the price of a regulated airline.
Meanwhile the economic
climate as a whole was becoming more unsettled - the 1973 oil
crisis rewrote many of the country's basic assumptions and
flowed through to massive losses in the airline industry (even
with its protected status). The stagflation that followed the
oil crisis caused a general feeling of malaise to settle, and
lead to the development of the 'Misery Index' (the combination
of the unemployment rate and the inflation rate) which in part
was credited with a change in administration to a Democrat
administration headed by President Carter in 1976.
Stagflation of a sort was
setting in to the airlines, too. Higher fares were impacting on
passenger numbers, and lower numbers of passengers made for
higher fares, in a vicious cycle. Even the least responsive of
the airlines were starting to get frustrated at their inability
to create more flexible fares, allowing them to sell some seats
at discounted rates in an attempt to bring more people onto
their planes and to then truly reduce the average fare they
needed to charge everyone.
Congress was concerned about the successive failures of the
nation's passenger railroads, culminating in what was the
largest bankruptcy in history by the Penn Central Railroad in
1970, the creation of Amtrak in 1971, and a huge taxpayer
bailout of Penn Central and five other railroads in that same
year, and feared that the ills of the passenger railroads might
flow over to the airlines too - something that at the time,
fresh after the oil crisis shock, seemed far from unthinkable.
Adding to the industry ills was a second taxpayer bailout, this
time of Lockheed, late in 1971.
The airlines were also
facing the need to upgrade and replace their fleets, and
Congress knew that they would be seeking government assistance
to do this in light of the then economic climate and their
Other deregulation activity
was occurring at the same time. The trucking industry was
largely deregulated in 1980 (it had been regulated since 1935).
The railroads - initially regulated as part of the Interstate
Commerce Commission in 1887, were partially deregulated by the
Railroad Revitalization and Regulatory Reform Act of 1976, and
further deregulated by the Staggers Rail Act of 1980.
Meanwhile, although the
airlines were almost guaranteed profitability, some of them
still managed to fail. There were sixteen 'trunk' carriers in
1936; forty years later in 1976, six of these had disappeared,
leaving ten trunk carriers, while not a single new airline had
been allowed to commence operations.
The remaining airlines had
grown fat and lazy. Load factors of 50% or less were common, and
a 55% load factor was the target for the airlines to operate
profitably and to get their 12% rate of return. But this
provided a mirror to the situation with the railroads where they
too had become complacent, inefficient, and underutilized during
their own regulatory protected environment.
Add to all of this a quiet
evolution in conventional economic wisdom, which no longer
propounded government regulation as the best way to manage
economies. Leading economists were now suggesting that regulated
industries were inefficient and had higher costs than did
In 1977 President Carter
appointed Professor (of Economics) Alfred E Kahn to head up the
CAB as its chairman, while a general union of political forces
and public advocacy groups all supported airline deregulation.
The airlines had repeatedly
'cried wolf' before about how occasional changes to their
operating environment would spell the end of life as we know it
- predictions always contradicted by the reality of what
subsequently happened, and so their opposition was discounted
and ignored, and the CAB itself had precious little to point to
that could demonstrate any value or benefit at all from their
regulatory involvement. And so, legislation quickly passed
through both the Congress and Senate in 1978 and was signed into
law on 24 October, 1978.
The Politics of Deregulation
Some people with short
memories have accused the Republicans of dismantling airline
regulation. But in 1978 - the year of the passing of the Airline
Deregulation Act - this was halfway through President Carter (D)'s
administration, with also a filibuster proof Democrat majority
in the Senate (61-38) and twice as many Democrats as Republicans
in Congress (292-143). And the preceding hearings by the Senate
Judiciary Committee in 1975 were chaired by Sen Edward Kennedy
(D - Mass).
The 'father of deregulation'
- Professor Alfred E Kahn, who was appointed to head the CAB
during its breakup period and who was arguably the greatest
advocate for deregulation in all industries, is also a Democrat.
While there was a general
bipartisan consensus supporting deregulation, it was not without
its detractors. In particular, the labor unions were concerned
at the impact of deregulation - they were concerned that if
their airline employers stopped operating on a 'cost plus'
basis, then they might start looking at their costs and start
objecting to what were generally higher than rates of pay for
comparable work in other industries, and they were concerned
that new airline startups might have non-union workforces. Small
towns were concerned they would lose their air service. And the
airlines were not sure if they'd be winners or losers in the
process, and so in general selectively resisted change.
excellent article on the
forces supporting deregulation and why
And good interview with Professor Alfred E Kahn (undated)
for some good statistics
good article too
evolution of FAA and what it does/regulates and
In 1918 the USPS commenced offering a fast intercity mail
delivery service that used airplanes (rather than trains or
other ground transportation) to transport the mail between the
cities. In other words, this was an airmail delivery
This represented the birth
of regular scheduled commercial airmail service. It
commenced on 15 May, and initially operated between New York,
Philadelphia, and Washington DC.
There had been earlier
one-off special events that saw letters being transported by
plane prior to then, mainly as a curiosity or novelty event.
It seems that perhaps the first ever 'airmail' flight was in
1911, a temporary
service that operated between 4 - 8 October, with mail being flown between
Kinloch Field near St Louis to the Fairgrounds Park in downtown
St Louis, from which it was then re-dispatched onwards.
To put the 1911 date in
perspective, back then planes typically had short range (150
miles or less), flew slowly (about 50 mph - slower than many
trains), had a maximum altitude of about 5,000 ft, and a plane
with one pilot could carry perhaps 100 lbs of 'cargo'. In other
words, in 1911 trains provided a faster, more reliable, and more
economical service than did planes. In 1911 there was no
thought of a regular airmail service, because trains were faster
than planes. But this quickly changed.
1920s - The USPS Operates the
Largest Air Network in the World
When the USPS first arranged
for mail to be transported by air, it made use of the US Army's
aviation wing, using their planes and their pilots.
An initial fleet of six
Curtis Jenny planes were specially purchased and modified - mail
was carried in the space where the forward pilot would have
But the Army did not want to be
involved in carrying mail - particularly because it was at the
time in the middle of fighting World War 1 in Europe, something
which was of course much more part of their core mission and
they resented having to take resources out of the conflict in
Europe and deploy them instead to carry civilian mail in the US.
Postal Service quickly formed their own air service, after only
a few months of using the Army. Over
the next seven years, this was to grow to become the largest air
network in the entire world.
1925 - A Transition to Private
In 1925 the Air Mail Act
authorized the postmaster general to use independent private
companies to transport air mail, and it also set the rates for
airmail postage and in turn the rates to be paid to the
companies that carried the air mail.
It was generally understood that the
purpose of allowing the Postal Service to contract with private
companies to carry mail was to provide some funding and ongoing
business/revenue/profit to allow private air service companies
to establish air service. The government vaguely
understood and appreciated that there were strategic and
business benefits to the country as a whole if it were to
encourage the development of commercial aviation, in line with
developments that were occurring elsewhere in the world.
The first commercial flight
to carry airmail was on 1 July 1926, between Boston and New
York, with an en route stop in Hartford. This was operated by
Colonial Air Transport, in a Fokker Universal monoplane, built
by Altantic Aircraft Corp (Fokker's American subsidiary) and
with a Wright Whirlwind engine. The plane could carry one pilot
and either four passengers or up to 940 lbs of freight, and had
a range of about 500 miles and a cruising speed of 98 mph.
Juan Trippe & Pan Am - a
Future Built on Airmail
Of some interest is that
this company, established in 1923, had a young Juan Trippe as
its general manager (and one of its shareholders too).
Juan Trippe would go on to found the Aviation Company of the Americas
(or possibly Aviation Corporation of America), based in Florida,
so as to provide services into the Caribbean. This company in
turn became Pan Am, with its first flight in 1927 between Key
West and Havana - carrying mail. Mail routes defined a lot of
the Pan Am growth around the world in the 1930s and 1940s.
Juan Trippe - and his
airline, Pan Am - revolutionized much to do with air travel. He
introduced the concept of coach class, was an early adopter of
jet aircraft, and pushed Boeing to develop the 747.
He remained President of Pan
Am until 1968, but remained a board member for some time
subsequently. He died at the age of 81 in 1981.
1925 - 1930 : A New
Industry Rapidly Evolving
With the passing of the 1925
Air Mail Act, the Postal Service gradually disbanded its own Air
Mail Service, first awarding shorter routes to private operators
and then eventually passing on the trans-continental routes too.
By the fall of 1927, the Air Mail Service was no more.
Flying the mail drove the
development of air travel in the US during the 1920s, and both
created new challenges and accelerated the development of
solutions. For example, because traveling from coast to
coast represented about 32 hours of flying time, the Postal
Service was keen to see the development of night flying so that
the 32 hour travel time could be done all in a consecutive 32
hour period, rather than over the course of three days during
daylight hours only. (By comparison, it took a train five
days to travel from coast to coast.)
Pilots navigated primarily
by following visual clues provided by the landscape below.
They would follow roads, rivers and rail tracks, but at night
these were hidden in the dark.
Even the daylight visual
clues were merely that, and primitive compasses did little to
help. And so the Air Mail Service encouraged towns to
paint their names on rooftops, and also to paint compass arrows
and quadrants, to help pilots understand where they were and
which way to fly. They augmented this with huge concrete
arrows set on the ground in the middle of nowhere, giving
further visual clues to pilots.
Next came the need to add
night navigational aids as well. Initially this took the
form of a land/air equivalent of lighthouses for ships - a
series of rotating beacon searchlights located every 30 miles or
so along the main cross-country air routes. These powerful
beacons enabled the pilots to fly from one to the next to the
next, and each beacon site had an emergency landing strip as
well in case the plane developed problems and needed to land.
These visual aids were then
enhanced by the first radio beacons. Radar wasn't to
appear until after World War 2.
With the evolving
industry and growing infrastructure needed to support it, the
government felt that the time had now arrived to introduce some
order, and so in 1926 the first aviation regulations were
enacted. Please read on to the second part of this series
covering the regulated period
1926 - 1979.
Part of a series on US airline
regulation, deregulation, and whether or not there should be
reregulation introduced again now
- please see extra articles listed at the top in
the right hand column
Related Articles, etc
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30 Jul 2010, last update
30 May 2021
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