A CEO asking for government regulation of his industry? My God, next thing you know, the car companies will come out in support of "socialized medicine"....

Appropriate coming from the CEO of American (lets include United here). These "companies" stay in business because they have everyone convinced that they're too large to fail, and have a raft of lobbyists on the payroll. They are truly slime: "regulation" means "tilt the table in our favor".

There are people who know how to run an airline: Jetblue, Virgin America, Southwest. The others should get it over with and auction off their assets.

Steve C, how parochial:

Folks like Ryanair, if given a shot here, might run circles around Southwest, not just the "legacy airlines."

Of course, that means you're ready to pay for a flight where just about every square inch of the plane's interior is an advertising billboard, and every amenity beyond air has a charge.

But, it can be done.

just the other day, i said to another much-air-travelled consultant i know "a push for re-regulation should be just around the corner."

too bad these moments of insight don't earn me a penny....

Bob Crandall is probably in the top three (and certainly in the top five) smartest and most successful airline executives of all time. (Fun fact: three of those five I'd nominate ran airlines based in Texas.) If he thinks re-regulation is the answer -- well, instinctively I would doubt that it is, but I'm definitely inclined to listen. The air transport system is effectively a public good, and while the last three decades of fares falling in real AND nominal terms have been fun, obviously it isn't sustainable. So we should listen.

Steve C, of those three "successful" airlines you've mentioned, only one has proven itself over a period of more than six or seven years (or six or seven months in the case of Virgin America.) Don't you think you ought to wait a little longer before pronouncing Virgin America the be-all, end-all of American airlines? I mean, it's not like United hasn't managed to survive the last seven decades or that AA hasn't lasted nearly as long and never declared bankruptcy -- something no large airline other than Southwest can claim, which admittedly is not exactly a point of pride in more rational industries.

The past three decades have seen an experiment with the idea of making air travel affordable for the non-wealthy, with a fair degree of success. However, especially in recent years, we've seen a steady deterioration in the quality of the travel experience. Russian-roulette fare structures, packed planes, ever-shrinking carry-on allowances, and most especially, increasingly onerous security requirements have made the skies ever less friendly. The last time I flew they requested I cool my heels in the airport for two hours before the flight in order to accommodate the security theater. For short-length flights this destroys most of the rationale for flying, and even for medium-length flights it makes today's higher fares hard to justify.

Which suggests we ought to rethink the shorter-length stuff in terms of high-speed rail. For example, getting from St. Louis to Chicago takes about 7 hours by car and around an hour and a half by air. But add 2 hours on the front for sitting in the airport lines, and you are at 3 and a half hours, not including time to pick up checked baggage (which you can no longer carry on). High speed rail ought to be able to make the trip in less than four hours, making it competitive with air travel.

I'm also guessing that rail would be more fuel-efficient than aircraft, and release less carbon.

So rather than prop up airlines in a losing bid to keep alive the cheap air travel model, why not be thinking rail? Air travel could then go back to being a pricey optional luxury rather than the only alternative to spending days on the road.

The airline industry in the U.S. suffers from too much regulation, not too little, as any comparison to the European airline industry would indicate. People like Crandall have been advocating a return to the pre-Khan days for a couple of decades now. If much of the aluminum were re-painted, and controlled by management and labor teams which had more productive relationships, the consumer would benefit. Bring on Chapter 7!

The most interesting part is near the end, where Crandall rejects the hub-and-spoke system the legacies use. (That said, Southwest, spin aside uses a modified hub-and-spoke system.)

And, he also wants more crackdowns on labor. I don't know what non-pilot labor, especially, costs in Western Europe vs. the U.S. And, as long as CEOs can draw outrageous stock options, pigs will get wings before airline workers sign off on this baby. (I have a couple of acquaintances who work for American.)

People like Crandall have been advocating a return to the pre-Khan days for a couple of decades now.

Maybe so, but Crandall ran a fabulously successful airline for several decaded, much of which time said airline could describe itself as "Something special in the air" to only occasional quiet titters. I doubt AA could pull that off today.

If much of the aluminum were re-painted, and controlled by management and labor teams which had more productive relationships, the consumer would benefit.

How'd that United ESOP work out?

Remember, Crandall ran that airline before dereg. Shit, I probably could have run an airline under old regulatory standards.

I agree with Jeff that Virgin and JetBlue are way too new to seriously be analyzed. Of course, contra Will, even though I mentioned Ryanair myself, there's no guarantee it's style of operation would work on longer U.S. routes.

Jeff, when did I advocate ESOPs? Crandall is in agreement with me that more chapter 7 liquidations, or at least the the far more credible prospect of such liquidations, would focus the minds of various management and labor entities wonderfully. The United, Northwest, Delta, and other brands, along with their management and unions, should have been delegated to the scrap heap a long time ago.

SocraticGadfly, minor correction: Crandall didn't become president or CEO of AA until well after dereg, though he was with the airline during the regulated era and at that time introduced all manner of developments that we take for granted today.

He also had an atypical but grossly illegal conversation with a competitor about price collusion right about the time he became president of AMR. A blemish on an illustrious record.

Will, apologies if I misunderstood -- I thought you were talking about the power of aligned management/labor incentives, which had been a selling point of United's ESOP experiment.

I do agree that Chapter 7 has been woefully underutilizied the past several years, though even that I think can only accomplish so much in terms of a sustainable business.

"I don't think JetBlue has a better chance of being profitable than 100 other predecessors with new airplanes, new employees, low fares, all touchy-feely," he says. "All of 'em are losers. Most of these guys are all smoking ragweed."
-Gordon Bethune

Well aligned incentives are often a good thing, as Southwest's profit sharing plan has shown. I've personally witnessed several times a Southwest captain assist in the cleaning of the airplane, but I've never seen such behavior in a Northwest pilot, which is the other airline I've flown most frequently.

More chapter 7 liquidations would foster a more sustainable equilibrium between seats available in the industry, and fares plus service which provide a profit. Like I said, I'm most familiar with Northwest and Southwest. For as long as I can remember, Northwest's management and unions have had an acrimonious relationship which has harmed the consumer, while charging non competitive fares that originate or terminate in their hub locations. Chapter 7 would have been a blessing 16 years ago, when the taxpayers of Minnesota provided subsidies, or more recently, when they filed chapter 13.

Are any of the RyanAir fans aware of the fact that RyanAir treats its employees like chattel? Their pay scale is one of the worst in the industry and benefits are pretty much "You may lick the plastic snack bags left over at the end of the flight."

Robert Crandall made several efforts to strangle Southwest airlines in its cradle, and American Airlines continues to use the Texas political machine to compete against Southwest because it is unable to do so.

The airline industry would never have come about in a free market--and good riddance, IMO. We'd be a lot better off in a decentralized economy of small-scale manufacturing for local markets, where essential long-distance shipping was done by rail.

The entire civil aviation infrastructure was built from scratch at taxpayer expense. And large passenger jets were only made possible by the heavy bomber program that began in the late '40s. Without heavy bombers, production runs of large civilian airliners would have simply been too short to pay for the extremely expensive machine tools required. What's more, the aircraft industry was spiraling into red ink and would have been lucky to survive at all if the Cold War hadn't saved its ass.

See Frank Kofsky, Truman and the Bomb Scare of 1948, and David Noble, America by Design.

Crandall is your typical dipshit conservative: Privatize the gains and socialize the losses.

Crandall is your typical dipshit conservative: Privatize the gains and socialize the losses.
Posted by: The Conservative Deflator on June 24, 2008 at 5:57 AM

Was it mentioned the SOB is from Texas the home of the Bush family, Kenny Boy Lay, Phil Gramm and the rest of the "conservative" capitalist elite who have brought America to this sorry state. "Privatize gains and socialize risk" is the Texas way.

Anyway the airline industry suffers from a lot of problems, one of them is continuing to embrace the spoke and hub system when modern information technology should encourage far more direct flights. Today, if you have time to spare go by air.

I suspect the passenger train will begin a comeback outside the Northeast. I have noticed already that railroad vacations are being promoted on the local television. It has been decades since passenger rail service has been aggressively advertised in my area of the country.

Just because Crandall is a smart guy that knows a lot about airlines doesn't mean this is a good idea for travelers. It most likely means that re-regulation would be a good thing for Bob Crandall. Of course he wants re-regulation. It's a lot easier to compete in a fixed market than one where he has to compete for price.

Also, what's with the opposition to RyanAir for purchasing a la carte? Why should someone pay for services they don't want? It cuts down costs for the individuals and lets them decide what they'e willing to pay for. Or is a la carte only good for cable tv? I say, give people the option to choose what they get,

Folks we are all looking at charging customers for peanuts. The fact is the airline industry is staring high dollar fuel down every day. Already it is often more expensive to fly some airplanes full than the public is willing to pay especially if you have to fly them to a central hub and then out to some spoke. The solution is smaller more fuel efficient airplanes using GPS to fly direct.

Ok, I read the article. Is there anything here beyond the usual that a businessman would like to have the government guarantee him a high price? Next thing we know, Kevin will link to a shocking(!) article on how the milk industry actually likes the government regulation that raises the price of milk.

I'm old enough to remember flying when airlines were regulated and people were free.

Flying didn't suck anywhere near as much back then.

Yeah, Steve, the good ol' days were when mostly only rich people could fly.

The large legacy airlines want more regulation so that they don't have to compete on price or schedule with the smaller, more nimble startups and with each other.

The large airlines and their unions are dying. Time for a bankruptcy and dismemberment, but what we will get is just more wasted resources on reorganizations. You have to be a complete idiot to invest in these airlines, but idiots are born every second of the day.

Sure, more (favorable) regulation might save the airlines (after all, regulation often means "government protection and barriers to competition"), but why do we want to save the airlines?

If we're going to expend public effort supporting a transportation mechanism, maybe we would be better off subsidizing high-speed, long-distance rail. Where's the benefit to the public of propping up the airlines?

I have always thought that in certain industries, the old "controlled monopoly" regulation schemes worked so much better than the "free market." After deregulation of the airlines, the phone companies, and the attempts at power company deregulation have shown us that deregulation brings bankruptcies, upheavals in employment, scandals, and millions of dollars in the hands of a few. I would welcome re-regulation.

"A dollop of regulation, along with new government policies and appropriate investment, would help the carriers get back on the right track."

First, if the government decided to reregulate it wouldn't be a 'dollop'.

Second, this kind of garbage is what didn't help the auto industry become modern until almost 20 years after the Japanese.

Third, he is yearning for the days when only rich people travelled by plane.

Fourth, there are airlines that do well, just not his.

Yeah, Steve, the good ol' days were when mostly only rich people could fly.
Posted by: Will Allen on June 24, 2008 at 10:45 AM

But in the good old days there were more "rich people." Since deregulation and the concentration of wealth in the hands of a few, a lot of "rich people" have lost their stable well paying jobs and have fallen back to just where they belong.

i fly quite a bit and I can't tell the difference between today and the good old days. The airlines have always treated coach (non-business) passengers like crap.

First, it simply is false there were more rich people prior to the late 70s. Second, the percentage of of the population which can afford to fly across the country today, even at today's jet fuel prices, dwarfs the percentage of the population which could sfford to to do so in 1970.
Airline regulation was a means by which a few companies could fleece the consumer.

Also, anyone who pines for the days of a highly regulated telecommunications industry, with one giant player, either has forgotten or never knew what a luxury it once was to talk long distance with someone for even 30 minutes.

Folks like Ryanair, if given a shot here, might run circles around Southwest, not just the "legacy airlines."

Er, Ryanair was tried here, at least the model was. It was called SkyBus. It was a catastrophic and ludicrous failure. Marie Antoinette above pointed out that Ryanair treats their employees like dirt. They treat their customers like dirt too. Might work in Europe where there is no tradition of customer service worth speaking of, but here? I think not, and the customers deserted SkyBus in droves.

It will be a good thing when flying becomes expensive and rare again. It's a monstrous waste of energy.

But just a dollop. No more.

And he'll know a dollop when he sees one (with a nod to the previous post)

Marie, I did not know details, but assumed that by Crandall's enthusiasm for that, and by any posters here that say we need even less regulation, that Ryanair did cut costs vigorously wherever they could.

That's why all the Euro-budget airlines are in the UK and not the Continent, I'm sure.

Kolohe, you're out of date.

With the phase-out of the Wright Amendment, DFW is now a two-airline duopoly. Instead, American and Southwest have colluded to squeeze JetBlue out of Love Field. (I live in Dallas and have written about this. Love will have fewer gates and flights than Houston Hobby.)

Susan, when I say "give Ryanair a shot," I wasn't referring to the labor issues. I was referring to things like a la carte charges for food, luggage, etc., which the legacy airlines are now giving us, and to things like the advertising inside planes.

Would I pay less for a flight with that? Yes.

Ron Byers: Air traffic soared exponentially since dereg. You're barking up the wrong tree here.

"Yeah, Steve, the good ol' days were when mostly only rich people could fly."

As compared to today, when the unwashed masses can fly coast to coast, but only the rich can fly on the shorter routes. Have you recently compared rates between LA and NY to rates between, say, Columbus and Charleston?

I like the idea of more rail, but that would involve (gasp!) infrastructure. The rails are now owned by freight companies and passenger trains have to wait for freight trains to pass by. Plus (from someone who traveled from California to Ohio via rail a few years ago), the rail beds are in terrible shape.

Of course, the (gasp again) government should be investing in new rail lines strictly for passengers, but until the Democrats get a filibuster-proof majority in the Senate, and until the Blue Dogs realize government spending CAN be investment in the economy, such a massive interstate investment is highly unlikely.

I would like to add a comment re high speed rail. I agree that this is something that we as a nation should pursue. However, it is also not the solution to all intercity transportation woes.

I live in Tucson. A high speed rail connection between Tucson and Phoenix, reasonably priced, would be a huge winner. But in Arizona, as well as other mountain states in the West, there are many cities and towns in the mountains.

Two of my most frequent destinations are Prescott and Show Low; I have relatives in both places. While rail connections to both would be feasible, with significant investment in infrastructure, the laws of physics dictate that those rail connections won't, by any stretch of the imagination, be "high speed". There's a roughly 4000 ft difference in altitude between Phoenix and Prescott, for example, and a roughly 5500 foot difference with Show Low. Plus mountains intervening, which require more circuitous routes.

Moreover, the populations of many of the smaller mountain towns in the West means that usage would never even approach that of places in the East or even in the Midwest.

My seat-of-the-pants guess is that high speed rail will become much more popular but that individual autos and buses will still be required for transportation needs, especially here in the mountain West.

Assuming you meant Charleston, WV, why on earth would you expect an airline trip of 163 miles to be priced for anyone but people who are desperate to fly, and thus will pay an extremely high price per mile? Why on earth would you expect the thousands and thousands of people who wish to fly long distances to subsidize the airfares of the extremely small number of people who wish to fly 163 miles?

Also, Wolfdaughter, please precisely define "big winner". Do you mean to say that train travelers between Phoenix and Tuscon would be willing to pay as much as the 85% of the construction, maintainence, and operational costs of such a line, in the manner that people who use the highways pay about 85% of such costs related to automobiles, via gas taxes? Mind you, I favor boosting gas taxes a lot more, to capture all sorts of externalities related to gasoline production and usage, but when I read people saying that a train between x and z would be a big winner, I usually discover that they mean a lot of people would like to use a train that was paid for by people who didn't use the train. I don't know if that is a useful measure.

Will Allen, re train subsidies...

Let's not forget that the commercial aviation industry gets its own government support in various ways as we speak.

Cal Gal, with the recurrence of the "Anazasi drought" just starting, plus global warming, if we're lucky, most of the Desert Southwest will dry up and blow away and become depopulated in 20 years.

Yes, gadfly, and to the extent that the subsidies are not captured by fuel and ticket taxes, fuel and ticket taxes should be increased. The only way we are going to find out what modes of transport people actually prefer is to have the people who use those modes pay for them, including paying for whatever externalities are involved, which, to be sure, can be tricky to calculate.

A ticket from LAX to LGA is $357 round trip (a month in advance) while a ticket from Columbus, Ohio to Charleston, South Carolina is $345. Considering that the second trip must connect somewhere (twice as many takeoffs and landings), I don't think anything is terribly out of line here, and the rich are not the only ones flying short trips.

One other notable difference, however, the LA to NYC trip does have a lot more competition, at least according to Orbitz.

Rather than fly to New York, one could take Amtrak for $650 round trip, but the travel time is almost 3 days (one way).

To me, part of the answer is more prop job planes. Since they need shorter runways, business tertiary airports in big cities can be made into commercial ones. Since they cover distances of up to 500 miles as quick as jets, there's no loss there. In fact, there's time gained with more small airports, shorter lines, shorter takeoff times.

Big airports can focus on longer flights.

What exactly would be so horrible about fewer people flying? If ticket prices were higher, I would have more excuses to skip the out-of-town weddings, family reunions, Christmas with parents, and all the other stupid stuff that I've thus far been too polite to refuse. Ditto more conference calls and fewer out-of-town meetings. I think it would be a net positive for plenty of people to stay at home more and fly less.

If Boeing can figure out a way to scale up the V-22 Osprey to carry 40-50 passengers, while retaining a range of 600 miles or so, that is an aircraft that could have large impact. When an airport can be about as large as a medium sized parking lot, all sorts of options are available. The place in it's military variant isn't all that loud either, which helps a lot. I'd speculate that you could gain orders for a 1000-plus planes like that, which would drive down the per-unit cost consderably. Since being activated, I think the plane has had a decent safety record, operating in the most harsh environments. I'm no aeronautical engineer, though, so who knows how difficult a task it would be.

"i fly quite a bit and I can't tell the difference between today and the good old days. The airlines have always treated coach (non-business) passengers like crap."
____________________

Under the old regulated system, anytime the CAB noticed an airline flying with anything approaching a 60% load factor (as opposed to today's 80-90% load factors), it would inform the airline that it was underservicing that particular route and direct the airline to add more flights.

"i fly quite a bit and I can't tell the difference between today and the good old days. The airlines have always treated coach (non-business) passengers like crap."
____________________

Under the old regulated system, anytime the CAB noticed an airline flying with anything approaching a 60% load factor (as opposed to today's 80-90% load factors), it would inform the airline that it was underservicing that particular route and direct the airline to add more flights.