Deregulation Runs Into Severe Air Turbulence

President Reagan didn’t invent the idea of deregulation. Airline deregulation actually began a decade ago. The breakup of Ma Bell was decreed by a fellow in judicial robes, not by some free-market ideologue in the Reagan Administration. The relaxation of federal controls on banking was under way before Reagan moved into the White House.

Still, the President’s “get-government-off-our-back” rhetoric has created an atmosphere in which only fuddy-duddies and spoilsports suggest that maybe the deregulation kick was a mistake, and that it’s time to swing the pendulum the other way.

So the monkey is on Reagan’s back.

The theory behind economic deregulation is fine. Too much regulation inhibits competition, protects less efficient companies from the discipline of the marketplace and therefore ends up penalizing the consumers whom regulation is supposed to protect. Bring in the fresh air of competition and the consumer will get the benefit of better service and lower prices.

As we have been rediscovering, however, there is a downside to deregulation.

The most visible case is the telephone business, where the anti-monopoly crusaders finally succeeded in fixing something that wasn’t “broke.”

For years the Bell Telephone system enjoyed a virtual monopoly, but this country nonetheless had the world’s best telephone service at what we now realize were bargain rates. Now that the Bell system has been dismembered and the glories of competition have been introduced, the average American finds himself faced with higher phone bills and service that is no better, and perhaps even worse, than it was before.

Less visible, but even more alarming, is what has been happening to banking and allied financial services.

Business Week, which is hardly hostile to free markets, recently ran a cover story on “The Casino Society” in which it reported that, with deregulation, prudent money-lending has given way to a go-go mentality that, shades of 1929, is undermining the strength and integrity of the entire financial system.

Then there are the airlines.

Air carriers historically have been subject to two kinds of regulation. One is economic regulation, having to do with routes and fares. The other is safety regulation, which means that when we buy an airline ticket we have a right to assume that the government is doing everything possible to ensure that we survive a flight from A to Z.

Unpalatable as it may sound to the traveling public, the fact is that no aircraft ever takes off with everything working perfectly. But it is the airlines’ responsibility, legal as well as moral, to make sure that the trade-offs between safety and profit considerations err on the side of safety.

The question is whether airline managements’ judgment is being skewed in a deregulated environment. The Federal Aviation Administration and the National Safety Transportation Board say that, regretfully, the answer may be yes.

The FAA recently imposed a record $1.5-million fine against American Airlines for maintenance shortcomings. The agency also proposes to fine Continental Airlines $300,000 for a series of pilot training and maintenance violations.

But the problem is broader than two airlines. To quote a passenger safety representative, “I think we’re going to find that maintenance is a problem throughout the industry.”

You have to understand that the present system of safety regulation grew up alongside close federal regulation of routes and fares, which limited the number of airlines competing in a given market.

Safety inspections are basically carried out by the airlines themselves, subject to audit by full-time FAA personnel. This worked fine in the good old days of limited competition. But what happens when, under deregulation, the number of competitors is expanded to include new airlines with marginal financial resources--and even the major carriers are operating under very real pressures for cost containment?

The airlines cite accident statistics to prove that, despite the spurt of fatalities among air passengers in the past year, flying is still the safest way to get from here to there. And they are right: So far, there is no way to prove that deregulation has caused a single passenger to be killed. But that is small comfort.

To borrow a phrase from the turbulent 1960s, you don’t have to be a weatherman to know how the wind blows.

In a deregulated airline environment, the emphasis is on cost-cutting. Pilots with gray hairs and thousands of hours of flying time have had to give way, in some cases, to younger and hungrier replacements. Considering the importance of maintenance in total airline costs, it should not be surprising that many carriers are cutting corners in this area, too.

Federal inspectors have a whole litany of horrible examples. The DC-9 with engine problems that was kept flying until the power failed on takeoff. The repeated occasions on which pilots for one airline had to land immediately after takeoff because maintenance workers hadn’t removed a special pin as called for in pre-departure procedures. The plane that lost an engine because frozen fluids from a leaking toilet were ingested. The airline that ignored repeated pilot reports of an ailing engine until the power plant failed on takeoff from the Dallas-Fort Worth airport.

To quote consultant C. O. Miller, “If cost-cutting is the only message that comes through to your employees, then you’re going to have people cut the corners” at the expense of safety.

Exactly.

Ronald Reagan would make an admirable white knight to joust against the excesses of deregulation. Unfortunately, he isn’t interested in the job.