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Airline Mismanagement

The benefits of airline deregulation were as diverse as they were substantial.

Perhaps most significant is that the naysayers' predictions about safety compromises has been proven decisively wrong.

 
 
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A History of US Airline Deregulation

Part 5 :  1979 - 2010 :  More Benefits of Deregulation - Jobs, Safety and Airplane Efficiency
 

The main driving force for new fuel efficient planes such as the 787 has been the airlines, who push Boeing and Airbus to develop new planes to give competitive and cost advantages.  We in turn benefit.

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

 

 

Contrary to the fears expressed by many well intentioned industry 'experts', deregulation did not result in any of the problems they projected.  As we detail in the previous part of this series, deregulation brought about a massive growth in air travel combined with huge reductions in the cost to do so.

And that's not all.  A booming airline industry brought many more benefits to the country as a whole.  And - almost last, but definitely not least, please do read down to see the amazing statistic about changes to the safety of flying.

Result 4 :  Hundreds of Thousands of New Jobs

So there the airlines were, scrambling to add new routes, to add new flights, and to respond to the millions of extra Americans flying their services.  What did this require the airlines to do?  Yes - add more jobs.

In the decade from 1979 to 1989, airline employment increased from 356,000 people to 556,000 people.  Almost exactly 200,000 more people were directly employed by the airlines.

Now think about all the other people who also gained employment indirectly as a result of this boom in aviation.  Airport workers.  Airplane builders.  Taxi drivers.  Rental car company employees.  Hotel workers. Security screeners.  And so on, as far as you care to go.

Don't forget also the next level of jobs.  All these direct new jobs and new incomes resulted in money being spent in local stores, and so more retail employment, more service industry employment and so on and so on, rippling all the way through the entire US economy.  Travel and tourism has always been a labor intensive industry.

In sorry contrast, as I write this, the US government has spent some uncertain amount of money way in excess of $1 trillion in 'stimulus funding' and 'bailouts' and is threatening to spend who knows how many more hundreds of billions of dollars in a further attempt to try and bolster what by just about every measure possible has been a failure and waste of money of the first huge amount of money.

The thought of truly creating 200,000 real jobs, let alone however many in total the growth in aviation during the decade of the 1980s actually caused, rather than spending huge amounts of money to create a pitifully small number of temporary jobs that may well disappear as soon as the artificial government funding disappears, seems to be a total impossibility today.

Perhaps we need to persuade the government to deregulate another industry, and to allow the enjoy a surge of new employment in another field, at no cost to the government and us, its tax payers.  Noting that the only industry sector to clearly grow its job numbers is the government, dare I opine that perhaps this is all backwards?  More employment could be created by less government, rather than by more government.

To fully consider the topic of airline employment, it is true that the last years have seen airline employment numbers drop - for example, from January 2006 to January 2010 the industry lost 26,200 jobs.  This is due to the airlines tightening up on work practices, and also due to the tougher economic times and reductions in people flying.

But more efficient work practices and greater productivity per employee are not unique to the airlines alone, and the fact remains that whatever the employment numbers are or would be, deregulation has created such a surge in airline travel that whatever the employment level is in the airline industry, it is much more now due to three times more people traveling.

Reason 5 :  The Airlines are Vastly Safer

One of the strongest held views of supporters of regulation is that the airlines can't be trusted to enforce their own safety, and that the commercial and competitive pressures of deregulation would force the airlines to cut back on the costs of safety programs.

Not only that.  Even today you will regularly read commentary from people stating as certain fact that the airlines are less safe now than they used to be.

Both claims have been shown to be laughably ridiculous.  Let's look at a very simple fact :

The fatal accident rate, per departure, is 13 times lower in 2009 than in 1969.  There were 1.302 accidents per 100,000 departures in 1969; in 2009, there were 0.098 accidents per 100,000 departures - that is not quite one per million flights.

This is an even more impressive statistic when you consider that each departure these days has more people on a plane that flies more miles than was the case in 1969.

The airlines are safety obsessed, not so much because they are 'good guys' but because the commercial consequences to them if they were seen to be operating an unsafe airline are unthinkably severe.  In curious contradictory fact, they would be largely shielded from these same commercial consequences in a regulated/protected marketplace.

Deregulation has encouraged the airlines to become more safety conscious rather than less.

Reason 6 :  The Airlines Are Driving the Development of Better Planes

With the extraordinary collapse of the world-wide airplane building industry, resulting in only two major companies remaining, the competitive pressures encouraging change and innovation within the aerospace industry have dropped down to close to zero.

Boeing and Airbus exist in a cozy duopoly, and as long as one company doesn't go off developing a fancy new plane, the other company feels no great pressure to do so either.  This was seen in the long and greatly overdue process over the development of a 747 successor, with Boeing doing all it could to discourage Airbus from developing a successor plane, and then eventually and half-heartedly coming up with a semi-successor itself (the 747-8 which already - prior to its first operational airline flight, already has the distinct appearance of being a massive commercial failure).

This can also be seen in the decision by Boeing to abandon its work developing the 2707 supersonic plane, and the general lack of interest by both manufacturers in supersonic design.

But nowhere has it been more obviously apparent than in the 737 and A320 series planes.  The 737 fuselage design dates back to the 1950s, and the first 737 flew in 1967.  The A320 is newer, but is still 22 years old (first flight in 1988).  These two archaic plane series are the oldest planes still made by both companies.

But they are also their best selling planes - surely you'd expect both Airbus and Boeing would be feverishly putting all their R&D into a pitched battle for leadership in this biggest selling most popular part of the commercial jetliner marketplace?

Instead, we see a stately and sedate process marked by very little innovation or development by other company, with both companies desperately hoping the other company won't do anything to upset the current 'status quo' and force them both into a costly process of developing replacements to the the 737/A320 series of planes, and with the attendant risk that either company might lose market share when the new competing planes end up being available to the airlines.

The only thing forcing Airbus and Boeing to come up with new airplane designs these days is the demand from the airlines to do so (and the uncontrolled competitive threats posed by the possible rise of new airplane builders from China/Japan in the East, and the ressurection of airplane buildings from Russia in the west).

The driving imperative need by airlines to get more efficiencies out of their operations has been directly responsible for their pressure on the airplane manufacturers (and engine manufacturers too) and the subsequent development of more fuel efficient and economic airplanes.

If the airlines were still in a protected regulated environment, it would not be so important to them to keep their costs as low as possible.  But in the competitive world they struggle to survive in, they need to keep fares affordable and costs low, so they are accelerating technological change in a way they didn't do and wouldn't do in a regulated environment.

Between 1971 and 1998 the fleet-average annual improvement in fuel economy per available seat-mile was estimated at 2.4%.  This might sound like very little, but it means the 1998 plane is giving almost twice the fuel economy of the 1971 plane (1.9 times more).

The most fuel efficient planes these days give over 80 mpg/passenger - a surprisingly impressive statistic that makes you wonder why the environmentalists are so anti-air travel.

Planes fly further than ever before, making it quicker, easier, and more economical to fly long journeys.  With the notable exception of the hideously inefficient (and very unsuccessful) 747SP, no planes in 1978 flew more than about 6800 miles.

Today there are plenty of planes capable of well in excess of 8000 miles, climaxing in the astonishing 10,800 mile range - fully loaded - of the 777-200LR, and the only slightly shorter 10,200 mile range of the A340-500.

So, it seems from the preceding analysis that everything has been good and great subsequent to airline deregulation.

But, wait!  There are still two remaining parts to this article series.

Firstly, it is not well appreciated that much of the airline industry remains regulated in some form or another.  Deregulation is a partial and incomplete process.  The next two parts of our series looks at the remaining areas of regulatory interference.

Second, some people - believe it or not - are advocating that we should reregulate those parts of the airline industry that were previously deregulated.  How and why can they think this to be a good idea?  What could we expect from a reregulation of the industry?  The last part of our series (coming soon) will look at this.

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 13 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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