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
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
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
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
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
Does that make sense to you?
Why shouldn't any airline be able to fly to/from any airport,
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?
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
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
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
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
The Increasing Spiral of
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
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
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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27 Aug 2010, last update
28 May 2011
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