Jimmy Carter's airline deregulation

[I spent the winter writing songs about getting better]

This is something I occasionally hear as an attack from True Leftists trying to argue the Democratic Party is such a corporate sellout, blah blah blah.

However I have to say on balance it was a Freedom Act. Prior to it the airline industry was ran by a cabal of a few who made it almost impossible to get a federal license and keep out competition, and prices were hugely inflated. Adjusted for inflation a plane ticket for a NYC-LA round trip cost over $1000 prior to it. Seems like the sort of thing that was just simply necessary.

[Atlas Has Shrugged]

Adjusted for inflation a plane ticket for a NYC-LA round trip cost over $1000 prior to it.

So that's why people dressed up when they flew .

[Simfan34]

Unfortunately, today's airline industry is now also run by cabal of a few airlines, who work extremely hard to keep out competition and prices are hugely inflated. Before deregulation, the government set fares and decided which airlines would have exclusive (or near-exclusive) rights over certain routes. Nowadays, the airlines simply do that on their own: they coordinate fares and avoid competing in the same markets.

At least, in the pre-deregulation days, the airlines, unable to compete on fares or routes, competed on service, which, funded by their massive profits, was excellent. These days, thanks to short-term activist shareholders, airlines are pretty much obliged to provide terrible service, lest they incur the wrath of their shareholders for insufficiently maximising value that quarter. These shareholders look at Spirit's large profit margins* and demand the airlines increase their profits. They push airlines to follow Spirit's (and it usually is Spirit, or Frontier) lead in introducing fees and surcharges, cut amenities, pack in more seats, etc, etc.

*Never mind the fact that Spirit is essentially a scam that tricks people into believing they offer the cheapest fares when, thanks to all their fees and surcharges, they almost never actually do. This is actually pretty well documented.

If I were a hedge fund manager, I'd do what Bill Ackman has been trying to do with Herbalife-- place a multibillion-dollar short position on Spirit and destroy them through a large, sustained, and public campaign to ruin their reputation. Essentially convince people that Spirit is, indeed, a rip-off. Watch their revenues tumble and stock price collapse, profit immensely. Conclude by roundly condemning their airline industry for ever following their lead, do the public and industry a favor by reducing the pressure on the airlines to match Spirit's performance, and say it was an act of public service.

[Simfan34]

Why do you think that the legacies are so invested in blocking open-skies agreements and keeping out Gulf carriers from US markets? Because, having run a race to the bottom, they'd be comically uncompetitive against Qatar, Etihad, and Emirates (the ME3). They're so invested in preventing or hindering competition, that they backed shutting down the Exim Bank, which would have made Boeing planes more expensive for foreign purchasers. Cutting off the nose to spite the face.

Of course, none of this doesn't mean that deregulation was bad-- just that an oligopoly, subjected to myopic and horrifically distorted market pressures, is worse. In Europe, things are much, much better-- there is a lot more competition, fares are much cheaper, and service still manages to often be better. I once flew from Milan to Vienna on a 30€ ticket, and they gave out two sandwiches (which were pretty good), and a beer!

The solution is to free up the market more (here's some reading for those who are interested); I fully support letting in foreign carriers-- unfair advantages be dammed (whereas I fear what the ME3's growth means for Ethiopian Airlines, which, unlike in the US, is a source of great national pride, and would support continent-level protectionism and open skies, which technically... well that's another story). Open up the skies more, and let the legacies get their comeuppance. Reducing short-term shareholder value-maximization activism would do much to help the airlines themselves, but that issue extends well beyond the airline industry.

And, as is often the case, so would smashing the unions, or at least the flight attendants' unions, which would allow airlines to get rid of all those horrible, rude, entitled flight attendants who have kept their jobs. Then again, my thoughts on the regulation of flight attendants' employment is quite, ah... liberal. In my humble--and very crude--opinion, airlines would be better served by spending less time trying to figure out ways to squeeze more seats on planes, and more time on trying to find helpful loopholes in labor laws... an awful thing to say, I admit.

[Bojack Horseman]

A horrible, terrible, very bad, no-good idea from the get-go, just like the deregulation of cable TV. The airlines enjoyed being regulated, as it guaranteed them profits because the government kept everybody on the straight-and-narrow. While fare competition was non-existent, it forced the airlines to compete by quality of service, as the fare is going to be the same on that route no matter which carrier you flew.

Deregulation combined with the volatility of the oil market and the US economy as a whole has turned the airline industry into a roller coaster in the almost 31 years since deregulation officially ended at the close of business, December 31, 1984. Every legacy carrier filed for bankruptcy since deregulation: American, Delta, United, Continental, Northwest, US Airways, Hawaiian, Pan Am before its collapse in 1991, all ended up in Chapter 11.

Then it got to the point where so many were failing that they all just merged. Most people remember Northwest and Delta's merger, United and Continental, Southwest and AirTran, and most recently, American and US Airways, but it's really nothing new. They've been doing this-you guessed it-since deregulation. America West bought the bankrupt US Airways in 2005. American bought the failed Eastern Air Lines, and later TWA.

Then there were the shutdowns due to the unpredictability of the economy. Aloha Airlines' shutdown in 2006 almost caused the University of Hawaii's football team to forfeit all its away games because the carrier who operated their charter flights no longer existed. ATA Airlines shut down in the middle of the night on April 3, 2008 with flights still in the air, leaving thousands of passengers stranded.

Nowadays it seems the only way to make a profit in this industry is to cut every corner and nickel-and-dime every passenger for everything. Spirit Airlines and Allegiant Air were the first to do this idea where your fare only gets you a seat and nothing more. No baggage, not a carry-on or a personal item, no beverage, having to pay to have an airport agent assist you at check-in, even a $15 surcharge just for the privilege of booking your ticket. They cram as many seats as possible onto their planes, meaning you practically have to hold your breath the entire flight to be able to fit.

The trend of cutting every corner, even in terms of safety, really began in the mid-1990s with ValuJet, who outsourced every non-essential position and knowingly broke federal hazardous cargo laws just to make a buck, and 110 people died because of it.

Deregulation was a terrible idea and yet there's no going back. The good old days of flying are long gone, unfortunately.

[Mr. Smith]

Virgin America and its struggles are an excellent example in the consequences of not acting like Allegiant and Spirit.

Anyway, awful is the only answer.

[Intell]

Awful horrible idea with dreaded consequences.

[Citizen Hats]

I can't help but be surprised at the reactionary distaste for what has been so obviously a triumph of the liberal market economy.  The blunt fact is that deregulation has made air travel more accessible and more competitive than it ever was under tender hand of the government to the tremendous benefit of the general public. 

I stack that along with Carter's deregulation of the trucking industry and the railroads as three enormous boons to the American economy. 

[OSR stands with Israel]

Freedom move of course

[Green Line]

What we really need to do is get rid of the open skies and stop those Gulf Carriers from flying here

[Simfan34]

What we really need to do is get rid of the open skies and stop those Gulf Carriers from flying here

...why?

Also the lack of a period in that sentence makes me really judgemental for some reason.

[Green Line]

What we really need to do is get rid of the open skies and stop those Gulf Carriers from flying here

...why?

Also the lack of a period in that sentence makes me really judgemental for some reason.

Sorry Simfan wont happen again

[🦀🎂🦀🎂]

What we really need to do is get rid of the open skies and stop those Gulf Carriers from flying here

...why?

Also the lack of a period in that sentence makes me really judgemental for some reason.

Sorry Simfan wont happen again

lol

Anyway: Trains > Planes

[publicunofficial]

I'll say it could be lean positive when we see that it could be saved by open skies laws.

Depends on how long it takes to implement that. It doesn't seem to be on the horizon for the immediate future.

[dead0man]

Obviously there was some negatives, but if it's 5 times cheaper there would have to be a LOT of negatives and I'm just not seeing that many negatives.

[I spent the winter writing songs about getting better]

Yeah even if you have to pay extra for special services you're still paying less than you were before.

[Simfan34]

What we really need to do is get rid of the open skies and stop those Gulf Carriers from flying here

...why?

Also the lack of a period in that sentence makes me really judgemental for some reason.

Sorry Simfan wont happen again

lol

Anyway: Trains > Planes

Yes, but not from New York to San Francisco.

Seriously, though, if one wanted evidence to support a claim that government intervention in the transportation industry is a bad idea, you could make a pretty good case using Amtrak. What was supposed to be a profit-making enterprise has racked up a $30 billion "cumulative deficit" filled by government subsidy. I'm not necessarily opposed to government subsidy, but national railways companies-- not just high speed lines-- can and do post a profit. The various successor companies of the the privatised Japan Railways post profits. Deutsche Bahn makes a profit. Even Indian Railways apparently turns a profit, and that's with all those people hanging on the sides and top of trains who, presumably, are non-paying "passengers", or at least I hope (I have no idea how much of a subsidy the latter two received and whether that's included in their final balance sheet, but they still show it can be done).

The problem with Amtrak is that, on most of its routes, it is utterly uncompetitive, in every measure-- price, time, and (relative) quality. It is often more expensive than flying, despite being several times slower. And I mean slow. Their on-time percentage is some absurdly low figure-- on average, outside of the NE Corridor, around 30-40% of trains are on time, and on the cross-country routes that can fall to 20%. Okay, these figures aren't quite as absurd as I imagined they'd be, but keep in mind that the target on-time percentage is supposed to be 90%.

[Taco Truck 🚚]

Why do you think that the legacies are so invested in blocking open-skies agreements and keeping out Gulf carriers from US markets? Because, having run a race to the bottom, they'd be comically uncompetitive against Qatar, Etihad, and Emirates (the ME3).and more time on trying to find helpful loopholes in labor laws... an awful thing to say, I admit.

Professor, tell us how to be competitive against a company that is getting BILLIONS of dollars worth of subsidies from their government.

You must be logged in to read this quote.

http://www.prnewswire.com/news-releases/emirates-confirms-billions-in-government-subsidy-for-airport-terminal-300134208.html

I guess the only question to ask you at this point Simfan is, why do you hate America?

Of course, none of this doesn't mean that deregulation was bad-- just that an oligopoly, subjected to myopic and horrifically distorted market pressures, is worse. In Europe, things are much, much better-- there is a lot more competition, fares are much cheaper, and service still manages to often be better. I once flew from Milan to Vienna on a 30€ ticket, and they gave out two sandwiches (which were pretty good), and a beer!

I am not saying this is a lie but it in no way gives a complete picture of the European airline industry... nor any airline industry.  At various times (post 911, post financial collapse) there has been major turmoil in the global airline industry and there have been deals to be had all over the planet.  Also for low cost airlines in Europe they give away a few seats at rock bottom prices as a marketing technique.  The average seat on a European airline does not go for €30.

And plenty of low cost airlines in Europe don't even give you a bag of peanuts or water without charging you.  The idea that there are airlines all over Europe handing out sandwiches and beers along with a free airline tickets for €30 is ludicrous.

Anyone that says there is not a severe race to the bottom being attempted in Europe is delusional.  Here is some insight from the CEO of Europe's second largest airline...

You must be logged in to read this quote.

http://www.telegraph.co.uk/news/aviation/9661829/Seatbelts-on-planes-are-pointless-says-Ryanair-boss.html

Some of the most grotesque ideas about air travel have come out of Europe... and Ryanair in particular.  Ryanair copied Southwest and "improved" upon the formula.  Now their garbage is being exported to airlines all over the world.  Ryanair was nickel and diming people for checked bags long before Delta and United got into that odious game.  Ryanair even weighs your cabin bag.  If it is over 22lbs they make you check it and add a fee.  If they deem your carry on bag to be too big even if it meets the weight limit they make you check it and charge you €50.  Don't trust a random person on the internet.  They post their rules on their website.

Sorry to go off guys but I've flown in Europe and there is a very good reason they still have a fairly robust train system.

[DC Al Fine]

I can't help but be surprised at the reactionary distaste for what has been so obviously a triumph of the liberal market economy.  The blunt fact is that deregulation has made air travel more accessible and more competitive than it ever was under tender hand of the government to the tremendous benefit of the general public. 

Indeed. Air travel is far cheaper and more easily accessible than back in the more regulated era. Even with the complaints about oligopoly and fees, ring hollow given the massive price differential compared to the 1970's. It's the poster child for free markets and deregulation.



Furthermore, it's bizarre to hear ostensibly left wing people talking about how an industry competing for rich customers with luxury services is somehow superior to having the average Joe able to afford a ticket. Where else is that argument remotely valid?

Are we to believe that the left is longing for the days when the rich man was driven in his luxury car while the poor man walked? Or the days when the rich ate luxurious meals while the poor couldn't afford meat?

[Simfan34]

It is the long-distance routes that drag the whole thing down. According to this Brookings report, it's worse than I even expected-- routes shorter than 400 miles carried 83% of Amtrak passengers and actually produced an operating surplus of $47 million, while routes over 400 miles, which, we can infer, carried 17% of Amtrak passengers, produced an operating loss of $614 million-- thirteen times larger than the profit generated by 83% of passengers! I could use those numbers to produce all kinds of absurd figures, but the point is that the long-distance routes completely destroy Amtrak's balance sheets, dragging the whole company down.

While the scale of the losses may be surprising, the fact that long-distance routes are financial catastrophe should not. Travelling long-distance by train is simply a nonsensical for the average traveller. No normal person is going to pay $1,200 to spend 72 hours either traveling on or waiting for (and that's if they're on time), just to get from NYC to LA, when business class on a non-stop flight between those cities costs $700. I could keep on doing this, but I think you get my point. The only kind of people who would travel cross-country by train, simply to get from one point to another, are those with a severe fear of flying, and perhaps people on the no-fly list. These people are so few in number that they need not factor into policy; no one, more or less, uses these trains as a way of getting from one side of the country to the other.

That leaves two groups of people who do travel on these trains, for other reasons. The first are tourists hoping to see the country by rail, essentially on a cruise. The other are people travelling between two points along the route, rather than from origin to destination, which, if we take the California Zephyr as typical, accounts for 85% of long distance Amtrak passengers. Taking a train from Chicago to SF may not make much sense as a means of transportation, but from, say SLC to Grand Junction, CO, might.... unfortunately, Google suggests otherwise: flying takes 1 hour, driving 4 1/2 hours, and Amtrak... 7 1/4 hours. Amtrak is much cheaper than the train ($49 to $267), but the savings are not likely to be considered proportional to the added time.

[Taco Truck 🚚]

Indeed. Air travel is far cheaper and more easily accessible than back in the more regulated era. Even with the complaints about oligopoly and fees, ring hollow given the massive price differential compared to the 1970's. It's the poster child for free markets and deregulation.

Keep in mind inflation adjusted oil prices are currently much lower than the prices in the late 70s through 80s.  That has nothing to do with deregulation.  Also the rise of the internet has helped consumers find cheaper flights.  You don't have to go through a travel agent.

I think what a lot of people are reacting to is the overall flying experience now is abysmal at any price.  Of course they are cheapskates and don't want to pay for the premium experience but that won't stop people from grumbling about the third class treatment.

Frankly if they just had a bit more legroom and got rid of all these fees I would be satisfied.

Of course deregulation also gave us this...

You must be logged in to read this quote.

http://www.washingtonpost.com/wp-dyn/content/article/2009/08/06/AR2009080602580.html

[Bandit3 the Worker]

However I have to say on balance it was a Freedom Act. Prior to it the airline industry was ran by a cabal of a few who made it almost impossible to get a federal license and keep out competition, and prices were hugely inflated. Adjusted for inflation a plane ticket for a NYC-LA round trip cost over $1000 prior to it. Seems like the sort of thing that was just simply necessary.

This is probably true, but we do need to have some new regulations today, and the big airlines that have merged in recent years should be broken up.

There should be some regulation on airfares. Everyone is always talking about how expensive it is to fly out of the Cincinnati airport, but nothing is ever done about it. There should also be laws against overbooking and stranding passengers on the tarmac for hours on end. I remember reading about how New York state had a law against stranding passengers on the tarmac, but some right-wing activist judge overturned it, because libertea.

[Bandit3 the Worker]

Unfortunately, today's airline industry is now also run by cabal of a few airlines, who work extremely hard to keep out competition and prices are hugely inflated. Before deregulation, the government set fares and decided which airlines would have exclusive (or near-exclusive) rights over certain routes.

Giving airlines exclusive "rights" was a problem, but I know they were still doing this even after deregulation.

[Green Line]

The major airlines (Delta, United, AA) are starting this new trend of "unbundling" their fares and its a big fat scam.  The "unbundled" fares are replace regular economy but with a negligible fare decrease and 0 of the benefits, and meanwhile standard economy goes up in price!

[Simfan34]

Either way, Amtrak tells us, if we got rid of all long distance trains, 23 states and 243 towns would have no rail service whatsoever. We'd also make AMTRAK profitable. Ironically, the biggest advocates for these services are usually from conservative Plains and Western states who oppose "big government waste"... unless they are the beneficiaries (but that to be expected of any politician). My solution is simple: eliminate long distance trains, and use the money saved to instead subsidise European-style regional rail systems (as opposed to American-style regional rail, i.e, suburban commuter rail) run by the states. State networks would likely be able to provide more flexible and higher frequency service than passing Amtrak trains, and, using diesel multiple units (like this snazzy Australian train), would also probably more energy- and cost- efficient, too. Considering the low price of natural gas right now, it may be also worth looking at bringing back a modernized version of the gas-turbine powered Turboliner. Perhaps, Snowguy will chew me out for this, just as he did a few years back when I proposed ending long distance services in the IRC, but I’m willing to run that risk.

Also helpful, for pretty much every train, would be to repeal (well, revise, really) the FRA regulations, which, in short, state that any passenger train that shares track with freight (which is almost all of them) must be built for "crashworthiness", which means that all trains must be much heavier, slower, energy inefficient, and expensive than they would be otherwise. A good example is the new Cities Sprinter locomotive, built by Siemens for Northeast Regional. The base model, the Siemens EuroSprinter, weighs 88 metric tons, produces 6,700 hp, and has a top speed of 140mph. The Cities Sprinter weighs 98 metric tons, produces 8,600hp, and has a top speed of 125mph, and costs anywhere from $1.5 to $2.0 million more than other variants of the EuroSprinter.

That's quite unfortunate, but the most embarrassing thing is that, for many of these routes, the trip actually takes longer than it did pre-Amtrak. The legendary 20th Century Limited was a sleeper train that ran between NYC and Chicago; in 1915, the trip took 18 hours, and when it switched to diesel after the war, it took slightly over 15 hours. The Amtrak train that travels the same route, the Lake Shore Limited, makes the journey in something usually between 21-24 hours; it is scheduled to take around 20 but is only on time 17% of the time. Think about that for a moment. Train travel between NYC and Chicago, in the year 2015, takes anywhere between three to six hours longer than it did one hundred years ago. We have moved forward a hundred years, and the train has gone six hours in the opposite direction!