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Airline Mismanagement

Many people criticize many aspects of the current airline industry, and sometimes end up concluding that we need to return to a regulated environment to restore 'order'.

But - ironically - many of the things they complain about are the result not of deregulation but of inefficient continued regulation.

 
 
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A History of US Airline Regulation

Part 6 :  Present Day :  Remaining Regulatory Constraints on the US Airlines - establishing and operating an airline
 

Many aspects of the airline industry remain regulated, making it difficult for new airlines to start business, and for any airline to expand into new markets, as Virgin America has found to its cost.

Part of a series on US airline regulation and deregulation - see extra articles listed in the right hand column.

 

 

It is an over-simplification to suggest that the US airlines are now completely deregulated.

They aren't, and the effects of partial regulation/partial deregulation interfere with the smooth operation of marketplace economics and are at the heart of many of the remaining problems in the aviation sphere, both for the airlines themselves and for us as their passengers.

The airlines are constrained - and our travel experience is impacted (usually negatively) from the moment we arrive at an airport through the flight itself and until we leave the airport at our destination.

In this and the following part of our series on airline regulation we look at the areas where airlines are still regulated or otherwise constrained from experiencing the full effects of an open/free marketplace.

Evolving - and Continuing - Regulation and Constraint

When the Wright brothers first took to the air in Kitty Hawk, NC, in December 1903 there were no regulatory constraints acting on them at all.  Aviation was a brand new field of endeavor, and so for some time following, government participation, oversight, and control was playing a game of reactionary catch-up, responding to problems that presented themselves.  The first part of this series looks at the evolution of commercial aviation prior to the development of substantial regulation, and the second part of this series looks at the evolution of airline regulation between 1926 and 1979.

But the so-called deregulation of the airline industry in 1979 (discussed in part 3) did not dismantle and remove all controls on the airlines.

We now look at some of the major areas of airline operations that are still regulated - and often inefficiently constrained accordingly by this regulation.

Airline Establishment

Perhaps the first place to start an examination of remaining airline regulation should be at the start - the establishment of a new airline.

While new airlines are now free to operate pretty much wherever in the US they may wish to, it is a non-trivial process to start a new airline.  This was most graphically and most recently illustrated by Virgin America's incredibly long and tortuous path to getting approval to start operations in the US.

A new airline has to be approved to operate scheduled airline service in the US by the Department of Transportation - a process that typically takes a year or more to complete.  The new airline has to demonstrate competencies in many areas, and also has to pass tests as to its ownership and its management/control, with limits on how much foreign ownership and effective foreign control can be allowed.

These limits - and the objections by other US carriers who claimed the new Virgin America would be breaking these limits - delayed the new airline from gaining approval from the Department of Transportation for an extended time period, with the net result that the existing airlines were able to beat back and delay the entry of a bona fide new competitor, during which time we all suffered from fares that were higher than they could have been (and subsequently became) with the entry of more competition, and suffering fewer flight choices until Virgin America commenced flying.

The limits on foreign ownership and control of airlines may (or, equally likely, may never) have had some applicable rationale in the past, but in today's internationalized world, where most of our lives are surrounded by non-domestic products and services, and where, in turn, much/most of our country's economy relies on exports, imports, foreign subsidiaries and globalization in every form, it seems anachronistic and unrealistic to restrict who can operate airlines in the US.

There was - and perhaps still is - some sort of irrational belief that foreign owned airlines might either kill off American owned airlines (does this represent a fear that foreign owned airlines are better than US owned airlines?) or else might somehow only provide service on profitable routes and ignore unprofitable routes, negatively impacting the access to convenient affordable air travel for many Americans (but tell me which US carrier isn't also exclusively concentrating only on operating profitable routes - none of the US owned airlines operate as charities, they are all for-profit entities and operate based on where they can profit, unconstrained by any thoughts of 'social good').

One other fear is that somehow the US would become 'vulnerable' if foreigners owned our airlines, or perhaps that they can't be trusted to do things correctly, or some other ridiculous prejudice unfounded on fact.

In a sufficiently grave national emergency, of course the federal government could 'confiscate' or commandeer all planes operated by any/all airlines, whether they were foreign owned or not.

Flying a Plane

Let's move forward from the remaining controls and restrictions on establishing and owning an airline.  Once an airline has been established in conformity with the existing regulations and requirements, what does it want to do?

Yes, it wants to start to operate flights.

Now let's look at just some of the myriad of regulatory constraints that exist here.

Choosing a plane to operate

An airline can't just go and buy any plane it wishes, from any manufacturer it chooses.  It can only choose airplanes that have been type certified by the FAA as being safe/appropriate/whatever for use in the US.

This concept embodies within it a strange belief that the government can do a better job than the airlines at knowing which planes would be best suited for the US aviation industry, and/or perhaps the omnipresent fear that the airlines can't be trusted to make wise decisions on their own and, if left to their own devices, would massively compromise safety issues and put us all at great risk.

Safety compliance isn't viewed by any airline as a cost to be minimized as much as possible.  It is essential business sense.  An unsafe airline wouldn't stay in business for long, and so airlines maintain safety practices as much for hard business reasons as they do to comply with government regulations or for any more altruistic reasons.  It happily happens that the self-interest and profit-maximizing desires of the airlines coincides with making safety a paramount priority.

Do government regulations actually add to and enhance the safety design and reliability of new airplanes?  Or do they just add to the development cost, purchase price and leadtime of getting new planes to market?

Hiring a Pilot

We are all accustomed to the concept that, for example, driving a motor vehicle on the road is not a natural right that flows to us all as citizens, but rather a privilege that is conditionally extended to us only if we meet certain qualifications and observe certain behaviors, and so there's no great excitement at revealing that pilots of airplanes also need to be licensed.

But the licensing procedure to become a pilot dwarfs anything required to drive a car, bus, or truck, and indeed, the government has just increased six-fold the number of hours flying time a pilot needs before he can fly a passenger plane.  This increase in hours was completely unsupported by any rational justification, and merely was a response to ill-informed pressure groups and vested interests - see our discussion on this point.

The net result is that the cost of becoming a pilot has massively increased beyond anything that could reasonably be expected/justified, and those costs will inevitably flow through to us as passengers.

Oh - and if the airline should want to crew the plane with only one pilot instead of two - well, that's not something that would be allowed to happen, either.

Hiring Flight Attendants

Maybe the airline decides to be the ultimate in no-frills airlines and to have no flight attendants at all.  After all, there are no flight attendants on buses, and none on small regional planes.

Sorry, that's not going to be allowed.  FAA regulations mandate the provision of flight attendants in proportion to the number of passengers on a plane, whether the airline wishes to employ them or not.  They're there, ummm, 'for our safety'.

And then when the airline goes to hire its flight attendants, it needs government approval for its choices (security issues), and needs to meet training standards for them too.

Maintaining the plane

We're all somewhat familiar with the concept of preventative and scheduled maintenance with our cars.  We give them regular oil and lubes, we change tires before they are worn treadless, and if the engine starts to misfire, we'll take it in for a tune rather than wait for the car to eventually breakdown by the side of the road.

The airlines of course adopt similar policies, for similar reasons of good sense and prudence.  But the government doesn't trust them to make the right choices, and maintains a massive oversight program through the FAA to determine exactly what maintenance needs to be done, and how, and with what spare parts, and by who.

Some people might think this could all be eliminated by merely requiring the airlines to follow the manufacturer's guidelines and trusting the airlines to do so, with the downside threat of unlimited liability if they don't.  But instead, the airlines are subjected to massive inspection programs and record keeping, while at the same time paradoxically being shielded from unlimited liability in many situations.

Loading the plane with passengers, freight and fuel

There is apparently no restriction on how close passenger seats can be to each other.  But there are restrictions on the maximum number of passengers that can be loaded onto each type of airplane, and additional restrictions on the minimum amount of extra fuel the airline must carry, whether it is needed or not, and additional restrictions on the maximum weight of the plane at take-off.

Carrying extra fuel can often both reduce the plane's ability to also carry more money-making freight and increase the fuel burn rate due to the extra loading of fuel that is going for a 'free ride'.

And the restriction on the maximum take-off weight of a plane?  Oh, that's sometimes nothing more than the airplane manufacturer exploiting the regulations.  If you want your plane to be allowed a higher take-off weight, you simply pay more money to (eg) Boeing and in some cases they simply write you out a new certificate allowing the plane to fly with a heavier load, while not making any changes to the plane itself.  It is hard to see how that regulation is benefitting anyone except the airplane manufacturer.

Hiring and Firing Staff

We've already discussed some of the constraints on the ability of airlines to choose the type of people, and the number of people, they hire for crewing planes.

But there's still more.  Not only must the airlines deal with unions for almost all their employee groups, but they are subject to the provisions of the Railway Labor Act (dating all the way back to 1926 and with its roots based on 19th century labor practices and problems), and their union negotiations are regulated by the National Mediation Board.

It is unclear if this results in an advantage or a disadvantage for either the airlines or their employees, but whatever it is, it distorts the 'free market' in yet another area and adds another level of regulatory intrusion.

Where and When to Fly, Marketing, etc

The preceding regulatory constraints are all more or less behind the scenes and don't touch on the main and highest visibility aspects of deregulation - the ability of airlines to choose where and when they fly, and to set their own fares and terms and conditions.

At least these other aspects of operating an airline are now deregulated, right?  Not as much as you might think, and for details on these issues, please click now to the next part of this series which looks at continuing regulation of where and when airlines can fly, how they can market, and other regulatory intrusions.

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

 

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Originally published 27 Aug 2010, last update 28 May 2011

You may freely reproduce or distribute this article for noncommercial purposes as long as you give credit to me as original writer.

 
 
Related Articles
1.  The Development of the Aviation Industry prior to Regulation 1911 - 1926
2.  A History of Airline Regulation 1926 - 1979
3. The Seven Reasons for Airline Deregulation in the 1970s
4. The Effects of Deregulation post 1979
5. More Benefits of Deregulation post 1979
6. Present Day :  Remaining Regulatory Constraints
7. More on remaining regulatory constraints

coming soon
8. 2010+ : Should we Re-regulate the Airlines now?

Please see also
Is airline competition always fair?
Airline competition 1980 -2010 RIP
 
 
 

 


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