The Savvy Traveler : Congress Considering Re-Regulation of Airlines

In the last 30 days I have been doing a fair share of flying, taking 15 flights throughout the United States and Canada.

I flew Eastern on the shuttle from Boston to New York; Delta from Jackson Hole, Wyo., to Salt Lake City; United from Los Angeles to Chicago; PSA from San Francisco to Burbank; America West from Baltimore to Phoenix; Cathay Pacific from San Francisco to Vancouver, and Continental from Chicago to Denver.

The score card is not a pretty one.

Every flight but one was late in taking off. That one flight left and arrived on time--the PSA flight between San Francisco and Burbank. But they lost my luggage (it was found later).

On each of these flights not one passenger got angry at the delays (including me). It was as if we all expected to be late.

Is it ever going to get better?

Is this what deregulation has wrought?

After a rash of consumer complaints about poor airline service and adverse publicity, Congress has been reacting in an unusually swift manner to consider the possible re-regulation of the airline business.

Congressional Bills

Both houses are working toward passage of some tough regulations aimed at reducing delays, mishandled baggage and misleading advertising, as well as improving airline maintenance and safety standards. Observers expect Congress to reach some type of agreement by the end of the year.

At the same time the Department of Transportation has announced a “truth in scheduling” rule that requires 14 large air carriers to publicly disclose key information about flight delays and baggage problems.

One bill (H.R. 3051) approved by the House Public Works and Transportation Committee would require that the DOT publish a monthly report detailing on-time performance, baggage misdeeds, canceled flights, bumping and passenger complaints.

Some of the penalities are quite stiff. A carrier that cancels any flight within 72 hours of its scheduled departure time for any reason other than safety would be fined $10,000.

Refunds on airline tickets would have to be paid within 30 days. Baggage reimbursement claims also would have to be paid within a month of application. And, if an airline doesn’t deliver a passenger’s bags within two hours of arrival time, the airline would have to provide the passenger with a one-way, space-available ticket.

Another consumer protection bill (H.R. 3158) would require airlines to provide passengers with a written explanation when a flight is canceled or delayed by more than three hours.

Benefits Cited

But not everyone blames deregulation for the woes of the airline business.

“What deregulation did was open the door to a host of possibilities, most of them beneficial for the passenger,” says one airline president. “When airlines failed, it’s because deregulation also gave an opportunity for bad airline management to show how really poorly they could perform in an open and unregulated environment.”

Airlines and passengers have been victims of a confluence of unfortunate events since deregulation started in 1977. At the time, most U.S. airlines already had a dismal earnings record, due to upwardly spiraling labor, fuel and material costs. And those costs continued to rise.

Then came the strike of U.S. air controllers in 1981 as the number of airline flights was increasing rapidly. The Federal Aviation Administration has never fully recovered from that strike (the striking controllers were fired by President Reagan).

Six years later there are 2,500 fewer fully qualified controllers. And of the 15,000 controllers on the job, another 2,500 are eligible for retirement. Aging air traffic equipment and a sharp decline in the number of workers qualified to repair these complex systems are also contributing to the number of close calls.

The crowded airspace has resulted in a record number of near-collisions, and only recently has the FAA been virtually forced by public pressure to impose stiffer measures to control that airspace. According to the FAA, there have been 857 near-collisions reported through Sept. 30. For the same nine-month period in 1986, the total was 628.

Since the Aeromexico DC-9 disaster in Cerritos in September, 1986, a third of American Airlines’ reported near-collisions have occurred in the Los Angeles area, although fewer than 4% of its flights originated here.

Only within the last three months has the FAA added airspace restrictions for private planes in the Los Angeles area, but most industry observers don’t think the new rules go far enough.

Airport Capacity

Then there’s the problem of airport capacity. Not one major airport has been built in the United States since 1974. Many airports have been stretched to capacity, and long ground delays and runway congestion is not uncommon.

To be sure, deregulation had its initial impact on airline fares. As new airlines came on the scene, there were some immediate effects. In some markets, fares went down dramatically.

“Nobody understood the stimulative effect of discount fares,” says David Hinson, chairman and chief executive officer of Midway Airlines.

And the statistics bear this out. The industry carried 270 million passengers in 1979. This year it has already flown more than 460 million.

“Not even the most optimistic supporter of deregulation,” Hinson says, “would have guessed we could have nearly doubled the traffic in such a short time.”

Not only has the traffic almost doubled, but the number of flights has soared. Since deregulation, flights in the United States have increased by more than a million. U.S. scheduled airlines link more than 58,000 city pairs with nearly 16,000 flights a day. More than 500,000 Americans are up in the sky every day.

And the system has begun to break down. Fares are no longer being discounted as widely; most are being increased. There have been charges of corner-cutting on safety and airline maintenance. Passenger service has deteriorated, and complaints against airlines are at an all-time high.

Airline failures, mergers and buyouts have reduced rivals and created mega-carriers that dominate their markets.

Eight airlines control more than 85% of all U.S. traffic, leading to some valid fears about the impact of oligopoly pricing of airplane tickets. In mid-September, the time when airlines traditionally lower fares in anticipation of smaller fall and winter traffic loads, some airlines raised ticket prices. American, for example, raised some of its discount fares $5 to $15 each way. Soon after, United and Delta matched the fare increases. (And this year, U.S. airlines are expected to post a record operating profit exceeding $2.5 billion, according to Airline Economics, a Washington, D.C.-based forecasting firm.)

Airlines Lobbying

All of this has given increased momentum to the airline consumer protection bills as they move toward passage in Congress. The airlines are lining up to fight the proposed legislation.

“Re-regulation would be the worst thing for the airline passenger,” Hinson says. “In the long run, competition among carriers only helps the consumer, and there’s still enough competition out there to keep everyone honest.”

The Air Transport Assn. is lobbying hard against these consumer bills. The ATA claims that the proposal for free tickets to compensate passengers for lost or delayed baggage could result in airline refusals to continue interline baggage agreements (baggage transfers from one airline to another on segments of a passenger’s itinerary).

Even Elizabeth Dole, who resigned recently as head of the Department of Transportation, warned Congress that the baggage provision could force travelers to reclaim their bags at each transfer point.

Some airlines, including Delta, American and Continental, are trying to counter the legislative moves with an aggressive pro-service advertising campaign.

Delta now “loves to fly, and it shows.” American is running ads on its airline maintenance and on-time performance programs. And Continental, admitting that it no longer wants to make excuses, is running a series of advertisements promoting improved on-time arrival, baggage delivery and airplane maintenance.

And there are even some lobbyists who are campaigning for more deregulation. A spokesman for the Competitive Enterprise Institute argues that airline deregulation and low fares have increased travel safety by drawing passengers from cars to commercial airplanes, thereby decreasing the number of automobiles on highways and, presumably, lowering the automobile fatality rate.

It’s an interesting concept, and I’ll be sure to give it more thought the next time I’m stuck on an airplane for two hours while we “drive” slowly around the airport.