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Airline Mismanagement

Some of the remaining airline regulation seems to be well meaning - but when is regulation ever not ostensibly well meaning.

However, when mandating things like a semblance of decency in treating customers, might it not be better instead to let bad airlines fail?

 
 
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A History of US Airline Regulation

Part 7 :  Present Day :  Remaining Regulatory Constraints on the US Airlines - marketing an airline and managing its routes
 

Airport delays - don't you hate them!  But don't blame only the deregulated airlines - blame other factors constraining the airlines such as the airports for inadequate ground facilities, and the FAA for inadequate air traffic control.

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

 

 

Continued airline regulation extends not just to the 'behind the scenes' aspects of an airline's operation, and to things that some would say are too important or essential to trust to an airline by itself (such as safety) but extend into the areas of an airline's business that had been ostensibly deregulated back in 1979.

Worse still, the effects of some aspects of remaining regulation in turn require (or at least seem to justify) additional regulation to compensate for the impacts of the other regulations, in a nasty vicious circle of ongoing regulation that continues to distort the potential promise of true free-market operations.

Ironically, many of the things we blame the airlines for today are as much due to ongoing external constraints and regulation as they are due to the airlines themselves.

Choosing Where and When to Fly

Surely this is something the airlines are now free to do any way they wish.  It was, after all, one of the cornerstones of the deregulation process in 1979, removing the need for airlines to get permission (which was typically not forthcoming) to add new destinations or to end service to existing destinations.

Alas, while the airlines in theory can now fly where and when they like, the reality is that due to the airlines not controlling either the congested air routes their planes travel along or the sometimes equally congested airports they must fly to and from, there remain massive constraints on the ability of airlines to offer the flights they want in a way that makes best sense for them, and for us too as their traveling customers.

Airports - Runways

Just as freeways become congested when there are too many cars and too few lanes, so too have many airports become congested due to too many planes wishing to use too few runways, with 'rush hours' at airports, sometimes only for an hour or two, but in some cases, spanning much of the entire day.

This is inevitably the case at some of the nation's most popular airports, massively impacting on the ability of airlines to grow their route systems to some of the most important airports and destinations in the country.

In a fully free market, access to congested airports would be auctioned off, perhaps on an annual basis, to the highest bidders, encouraging airlines to get best use from the access they paid for, and also giving the airports (and FAA/Air Traffic Control) the best return on their scarce resources, helping them to most equitably fund ongoing improvements and enhancements to their much needed services.

Instead, airlines with existing access rights hoard those rights to keep competitors out, while themselves often making poor use of the rights they have.  A new airline that wishes to operate a full 300 seater plane to/from a capacity constrained airport might find itself blocked while an existing airline is free to continue flying a half full 50 seater plane in its place.  Where's the free market good sense in that?

Airports - Terminals

Even if an airline can get access to the slots they need to take-off and land, they may find that there are no suitable ground facilities at the airport's terminals to allow the airline access to gates, departure lounges, checkin areas and baggage carousels.

In some cases, airlines will game the system and will continue to protectively keep airport terminal facilities to themselves that in truth they don't essentially need simply to exclude other airlines from establishing a competitive presence at the same airport, and the propensity for airports to give long term leases to airlines can make it hard for a new carrier to start operations at a new airport.

It is understandable that airport owners seek long term security when committing to the capital intensive costs of building new terminals, but in reality airport owners are not truly getting security, due to airlines simply going into Chapter 11 bankruptcy and voiding airport lease agreements as part of their subsequent restructuring.

Long term leases don't effectively lock airlines in to airports, rather than do the opposite - they lock out other airlines who at some point subsequent to the lease being signed may represent more revenue to the airport authority  and offer better service and overall benefit the area served by the airport.

Paradoxically, most airports are owned by local authorities that have as a presumably over-riding goal the provision of the best possible services to their local constituencies, but their actions in managing access to their airports can provide completely the opposite outcome.

Airports - Noise and Time

There's still more.  Even if an airline can get take-off/landing slots, and terminal facilities, maybe it can't operate flights at the times it wants to operate them - perhaps due to airport noise related operating time limits, or just because the airport is generally shut at the time the airline wants to send in a flight.

For sure, there might seem to be very little need for flights at 2am, but maybe it makes operational sense for an airline, or fits in to a timetable that has a convenient take-off/landing somewhere balanced by an inconvenient time at another airport, or maybe an airline wants to experiment with some marginally costed bargain fares by getting extra hours of utilization out of the millions (billions) of dollars worth of planes it otherwise parks for the night, and the airport gates it leases but doesn't use for many hours of the day, etc.

The traveling public has shown a great propensity to accept all manner of inconvenience in return for discounted airfares - maybe there's enough people willing to travel at 2am (and after all, that 2am time relates only to one end of the flight - perhaps it is balanced by a perfectly sensible time at the other end of the flight) as to make such flights feasible.

We may never know, due to restrictions on airport operating hours at many locations.

Airports - Route Restrictions

So maybe an airline wishes to fly from Los Angeles to Dallas/Love Field, or to Washington/Reagan National Airport.

It can't do this, due to restrictions on where planes are allowed to fly to/from at such airports.

Does that make sense to you?  Why shouldn't any airline be able to fly to/from any airport, and from/to any other airport?  The answer to that question lies in a complexity of 'protective' and restrictive agreements between airports and other local authorities, but the bottom line is simple.  This is yet another level of interference between airlines and the free-market operations they might otherwise wish to undertake.

Air Traffic Constraints

Even if an airline can optimally solve the preceding four sets of constraints, it still has to fit its flights into an increasingly congested sky, with all flights being managed by an antiquated and woefully obsolete management system by the FAA that is terribly out of date and which fails to take advantage of 'new' technologies that would vastly expand the ability for the airlines to fly more flights, more directly, and more efficiently and cost effectively.

The quotes around the word 'new' are because some of these technologies are not at all new.  In particular, GPS technology was developed in the 1970s, and allows for a massive increase in precision in terms of locating the exact position of each plane at any minute, and modern computer systems can manage a much greater complexity and density of flights in a given sector of airspace.

But the FAA - due to budget constraints and who knows what else - has failed to keep up with the potential offered by (and the need for) new technology, constraining our airlines to inefficient and delay prone flights, which in turn adds to our costs of travel and increases the inconvenience factor due to the propensity for delays, exactly the same as occurs on a freeway operating close to capacity - sometimes you have a dream commute, and sometimes you have a nightmare commute, whether on the ground or in the sky.

Even the much discussed tarmac delays are many times not the airlines' fault.  To start with, much of the reason for tarmac delays is due to an inappropriate traffic management system by the FAA - 'first inline = first to take off'.  A plane doesn't get into the departure queue to fly from an airport until it has physically pushed back from the gate and taxied to the queuing location on the ground.  Why not instead assign take-off times in advance and only allow planes to push back when they are free to then proceed without delay to take-off?

International Flights

So maybe an airline decides it wishes to fly internationally.

The good news is that - again in theory - it can do so these days.  The bad news is that it may find itself subject to a complex confusion of bilateral constraints as to how and where it can fly, and a range of limits and controls that are, in classic Orwellian doublespeak, referred to as the Freedoms of the Air (in truth they are anything but freedoms - they are restrictions).

The airline ends up finding itself subject to additional regulations not only imposed on it by the country to which it is now wishing to fly, but also of other countries over which it may wish to fly on its way to and from its new destination.

Forget the promise of 'open skies' agreements.  International air travel remains much more tightly regulated than domestic travel (which is why airlines tend to make greater profits on their international routes than on their domestic routes).

Marketing and Passengers

Phew!  What a lot of constraints and controls we've already uncovered.

But at least an airline is free to set its own fares, to develop its own marketing, and to set its own terms and conditions in terms of how it relates to its customers, right?  Wasn't this the other big part of deregulation?  Uhh - wrong.

The Department of Transportation sets rules for how fares can be described in advertisements.  Various government organizations impose all manner of fees and other costs on the ticket prices the airlines charge.  In some cases it is now possible for the third party fees and costs to exceed the underlying value of the net ticket proceeds the airline receives.

The customer experience is constrained by the airline's access to facilities in the airports it flies to/from.  Maybe the airline (and its passengers) has to put up with gate lounges that are too small, maybe it can't open a frequent flier lounge, maybe the luggage carousels are too small and congested, and maybe the airport's baggage handling system frequently breaks down.  These are all things that people blame at least equally on the airline as on other factors, but they are also things that many times the airline can't easily control.

Talking about ground experiences, let's not forget the passengers' experience going through airport security - one of the least pleasant aspects of the total flight transaction, and something completely outside of the control of the airlines.  The enormous new government department, the TSA, has not measurably improved any aspect of air travel security while impacting negatively (and largely unaccountably) on the travel experience of us all.

Which leads on to considering how the airlines handle customer complaints and problems.  This opens up a confusing can of worms.  The airlines even have regulatory impacts on them there too.  But they both have exemptions from many normal liabilities for consumer protection, as well as subsequent consequential regulatory obligations.  They have mandates for how they must respond to certain issues - things such as baggage liability, denied boarding, and the like; they are even required to answer complaints within a maximum time period.

That's not to say that it is a bad thing that airlines have some standards imposed on them, but maybe it might be a more perfect implementation of deregulation if airlines were allowed to be as good or as bad as they wished to be, so as to let the good airlines distinguish themselves and survive/prosper, while the bad airlines could quietly fail.

On the other hand, regulations also exempt airlines from some of the controls and marketplace recourses that affect most other companies.  For example, it is close to impossible to sue an airline for bad service or for failing to provide the service it semi-promises.

On yet another hand (is your head spinning yet?), at present due to all the other remaining regulatory impositions and constraints, the market is not working 'perfectly' and it is difficult for airlines to respond to opportunities (such as other airlines offering very bad customer service) and so the presence of regulation that interferes with an efficient/perfect market in turn demands more regulation to protect us from the effects of the other regulation.

The Increasing Spiral of Legislation

Phew!  Follow the preceding reasoning if you can.  In simple restatement, the airlines have been protected by regulation (legislation) from most consumer protection burdens and our rights as customers have been massively abrogated.  So, to compensate for this regulation, new regulations have been created imposing some consumer protection obligations on the airlines.  And due to other regulations impacting and limiting the effect of free market forces, more regulations are needed.

That's a vicious circle and expanding spiral of legislation and regulation.  Wouldn't everyone be better served by freeing up the marketplace further, rather than by regulating to correct the distortions created by other regulations in the first place.

Omnipresent Regulation and Constraint

So, add all this up, and we see that many aspects of airline operation remain as regulated today as they were prior to 'deregulation' in 1979, and even those parts which were ostensibly deregulated remain festooned with constraints.

Most importantly, many of the things we criticize the airlines for today are not things the airlines have (complete) control over, and - perhaps ironically - many of the things we say should be (re)regulated are already regulated.

For more on suggestions that the airlines should be reregulated, please turn to the next part of our series, due to be released shortly.

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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