Coming Soon: Airline ‘Reregulation’
For almost half a century, beginning in the early 1930s, our nation’s airlines operated in a special, protected environment.
On the one hand, they were private businesses, just like butcher shops, bakeries and dry cleaners. On the other hand they had an invisible shield that allowed them to, in a sense, conspire together to control the market, free from the danger of antitrust prosecution.
In the tightly regulated world in which they lived--up until Oct. 24, 1978--air carrier executives were secure in the knowledge that they didn’t have to worry about new competitors in their key markets. The Civil Aeronautics Board--the regulatory body--wouldn’t allow it.
Higher costs, perhaps a result of new labor contracts or fuel price increases, would simply be passed on to the public in the form of fare hikes. And competitors would charge the same, because that’s the way things were done under regulation.
The airlines even had a mutual aid pact that allowed them to compensate colleagues who were grounded by strikes. It was a way of saying they were sorry for benefiting from increased traffic at someone else’s expense.
Could you imagine Chrysler paying money to General Motors to keep it solvent during a strike?
Starting as early as 1965 some people began to look at this rather odd, protective society. The first rumblings of a movement to deregulate were heard.
The theory of deregulation is simple: Let market forces, not government fiat, dictate airline policies, as they do in other private businesses.
New airlines would be allowed to enter the field and fly whatever routes they wanted without hindrance. Strong companies could take over their weaker brethren. Above all, carriers could set their fares as low as they wanted without having to justify it to any regulatory body.
This, we were told, signaled the dawn of a brave new world in which air transportation companies would operate within the traditional American capitalist system, free to control their own destinies. It would, deregulationists promised, reward enterprise and creativity and bring consumers greater freedom of choice and access to inexpensive transportation.
So what if it also led to massive airline bankruptcies, an industry shrinking by merger to a handful of powerful companies and badly managed, under-financed, fly-by-night new entrants who came and went at breakneck speed?
It’s been almost nine years since the law was enacted and the hubbub hasn’t settled yet. In many respects the airlines still haven’t come to terms with the realities of deregulation. And people in high places are starting to take note of that apparent inability.
At times over the years, critics have urged the government to step in and take over the throttle again. But they have generally been a relatively quiet voice . . . until now.
Never at any time has the call for some form of “reregulation” been stronger than it is now.
A number of issues are involved, which may generally be lumped under the heading of “service.” On-time performance--or, more accurately, lack of same--is a major issue.
Transportation Secretary Elizabeth Dole missed a funeral by three hours . . . because her plane arrived late. Dozens of congressmen and senators have missed speaking engagements for the same reason.
In Los Angeles recently, Matthew Scocozza, policy chief at the Department of Transportation, gave several examples of airline fiascoes.
For instance, a DOT study of airline performance in Atlanta showed that three of the flights chosen at random had a zero on-time record for six months in a row. Elsewhere, no fewer than 12 airplanes list the same minute as their departure time from Newark--clearly a physical impossibility.
You only have to look at the schedules at LAX between the hours of, say, 7:30 a.m. and 9:30 a.m. to know that not all those planes are going to get off the ground at the appointed time. The airport, improved as it is over the last three or four years, simply can’t handle the volume of traffic.
Examples like those are everywhere. Scocozza characterized as “baloney” the airlines’ claim that it’s air traffic control that causes delays.
According to Scocozza, what is at fault is the airlines’ scheduling of too many flights too close together--all ostensibly in the name of giving the public what it wants. He warned that unless the carriers could voluntarily agree to reschedule their departures more realistically, Congress and/or the DOT would do it for them.
It naturally follows, of course, that if a flight doesn’t get away on time, it’s unlikely to get to its destination on time. And that’s another area in which Congress is getting impatient.
Why, lawmakers are asking the airlines, if you know your plane traditionally doesn’t leave on time, do you insist on promising an arrival time you know you can’t make? For most people, especially those traveling on business, when the plane arrives is more important than when it leaves.
The answer to that problem, in Congress’s view, is to stretch the published elapsed-time figures so that, if you’re late getting out of the gate, at least you can arrive on schedule.
Piedmont Airlines was the first to voluntarily make that adjustment in many of its markets. American recently announced that it would follow suit, lengthening the published flying times for many of its 1,600 daily departures.
That is not a step easily taken. Both Piedmont and American risk income loss as a result of their gutsy actions.
Here’s why: Airline automated reservations systems, now installed in 95% of the nation’s 30,000 travel agencies, display flights with shorter elapsed flying times in each market first and the longer flights later.
There is a natural human tendency to take the first of anything that’s available. And that includes airline seats.
So, by voluntarily accepting a lower place on the travel agency reservations screen, Piedmont and American could lose out . . . even though their competitors don’t fly any faster.
Some airlines, of course, are resisting the idea of giving up prime departure times or adjusting elapsed-time estimates. And for that reason, some on Capitol Hill want either the DOT, or the Federal Trade Commission, or even a newly created body, to force them to do one or the other, or both.
Recently, too, airlines have begun scrambling to integrate into their frequent-flier programs the rewards provisions of airlines they have acquired. And those provisions don’t always dovetail with those of the acquiring company.
Case in point: Delta and Western. Rewards of upgrades and free flights started coming to Western passengers after they had flown fewer miles than those in the Delta program. So, after the takeover, Western frequent fliers were simply issued a new set of requirements to earn rewards under the Delta plan, making qualifying tougher.
Delta will argue that point, but the fact remains: You don’t earn a free flight in the Delta program as fast as you did in Western’s.
Other airlines also changed--or tried to change--their passengers’ qualifying terms after they acquired other companies, and some even tried it when they hadn’t been involved in mergers. Congress didn’t like that one bit, either, and a lot of legislators were quick to threaten a policing mechanism unless the airlines thought again.
Other areas of airline service are coming under increasing scrutiny and could have some form of reregulation thrust upon them.
For instance, some in Washington would like the airlines to spell out for the consumer the accurate on-time performance record, over a period of months, of the specific flight requested. Think about that: Would you get on one of those flights in Atlanta if the airline told you in advance that it had not left or arrived on schedule for six months?
Lost baggage policies, the number of seats available at “capacity controlled” prices, cancellation penalties on advance purchase tickets . . . these and other aspects of airline life relating to the consumer are areas that need tightening up, in the opinion of some in Congress. And if the airlines won’t agree to tighten them up, it may be done for them.
If the airlines do find themselves laboring again under the government’s often unresponsive hand, they will complain bitterly, you can be sure. They will also have nobody to blame but themselves.
The warning signs have been there for many, many months. Service has deteriorated, no matter what they tell you.
The DOT has taken the position that, since deregulation brought lower fares, then all of the other repercussions taking place are simply part of the American marketplace at work. Those repercussions are starting to aggravate consumers who also double as voters, and they’re letting their elected officials know about it.
There is much positive good in deregulation. Ironically, the competition it was designed to create may be the factor that forces the reimposition of at least partial government control.
