Why airline reregulation is no longer taboo
— -- For three decades now, two things have generally been accepted as truisms in the airline industry: 1) Every airport bar overcharges and 2) deregulation was a good thing.
Since the Airline Deregulation Act took effect in 1978, it's been an article of faith within most airline circles that this development was a positive change. And there has been compelling evidence to support such a thesis:
• According to the Air Transport Association, 275 million passengers were enplaned by U.S. carriers in 1978; that figure had nearly tripled to 769 million last year
• Overall, the cost of air travel became more accessible for millions of Americans
• Despite generating concerns such as the current maintenance outsourcing crisis, commercial aviation has steadily become statistically safer over the last three decades
On the other hand, there's no denying that airline service has rapidly deteriorated in recent years. By every measure reported by the U.S. Department of Transportation (DOT), things have gotten worse: There are more delayed flights, more mishandled bags, more involuntarily bumped passengers and more consumer complaints. Yet despite all this evidence, the airline industry has displayed shockingly little concern, by chronically denying blame and balking at any and all forms of passenger rights legislation.
What's more, we now face a fuel crisis that has ushered in higher fares, airline bankruptcies and widespread cutbacks in service. Consider the following:
• According to data released last week by American Express, in the second quarter domestic fares rose by 10% and international fares by 11%, year-over-year
• In just one gruesome week earlier this year, three U.S. airlines shut down, another ceased flying as previously announced and yet another announced a later shutdown
• One analyst estimates capacity has already been cut this year by 9% nationwide, and it's still only August
The end is nowhere in sight, and the term "staycation" seems to have permanently entered the lexicon. Because of all these factors, it's clear we're now in an era in which it's no longer a given to chant the mantra, "Of course deregulation was a good idea, stupid."
Two years ago, the Government Accountability Office looked at reregulation, and recommended against it. But then the "R" word came up again earlier this year in a Senate hearing about airline consolidation, and there's been no turning back. Since then, it's become one of the hottest topics in airline circles, with interested parties as diverse as labor organizations and investment banks calling for some form of reregulation. And recently other voices have begun weighing in as well.
Players from the past speak out
One observer with a unique perspective is Robert Crandall, the former chairman of American Airlines and a recognized industry leader — for better or worse — during his tenure in the business. In a speech before the Wings Club in New York City in June, Crandall noted the following: "The consequences (of deregulation) have been very adverse. Our airlines, once world leaders, are now laggards in every category, including fleet age, service quality and international reputation. Fewer and fewer flights are on time. Airport congestion has become a staple of late-night comedy shows. An even higher percentage of bags are lost or misplaced. Last-minute seats are harder and harder to find. Passenger complaints have skyrocketed. Airline service, by any standard, has become unacceptable."
Then, in what came as a surprise to many but really should not have, Crandall advocated — just as he had in the 1970s — against complete deregulation. He stated: "Three decades of deregulation have demonstrated that airlines have special characteristics incompatible with a completely unregulated environment. To put things bluntly, experience has established that market forces alone cannot and will not produce a satisfactory airline industry, which clearly needs some help to solve its pricing, cost, and operating problems."
