Features

March/ April 2012 Terminal Sickness

How a thirty-year-old policy of deregulation is slowly killing America’s airline system—and taking down Cincinnati, Memphis, and St. Louis with it.

By Phillip Longman and Lina Khan

St. Louis’s loss of service comes despite the fact that the population of the St. Louis metropolitan area, the eighteenth largest in the U.S., grew by more than 4 percent between 2000 and 2010. The city is also the home of eight Fortune 500 companies and is a major center for such international players as Anheuser-Busch InBev, Monsanto, Boeing, Emerson Electric, Express Scripts, and Nestlé Purina. The GDP of the metro area, which is also propelled by such large research institutions as Washington University and a fast-growing medical sciences sector, rivals that of oil-rich Qatar. Yet like most other midsize American cities, St. Louis’s economic development is now hostage to the shifting, closed-door deals and mergers of a mere handful of airline executives and their financiers. The prevailing mood was captured by a St. Louis Post-Dispatch editorial that quoted “The Serenity Prayer” in advocating philosophical acceptance of the distant forces shaping the region.

Memphis International faces an even more urgent reason to pray. When it was designated a hub by Northwest in 1986, the airport undertook record-breaking expansion projects to house the airline and its regional carrier, Northwest Airlink. As in other cities, lack of competition at the airport led to record-high airfares. These high fares are still in place, but they haven’t been enough to preserve service. Delta’s acquisition of Northwest allowed the executives of that Atlanta- based airline to diminish the airport’s hub status. In March of 2011 the post-merger airline announced that it would cut 25 percent of its flights from the city. This loss of connectivity affects Memphis in ways both big and small. The Folk Alliance music conference, held annually in downtown Memphis, recently announced that it would move to Kansas City starting in 2014, due in part to airport hassles. The Church of God in Christ, too, recently decided to move its yearly convention out of Memphis, breaking 100 years of tradition. When Mayor A. C. Wharton visited church leaders to lure their 50,000 convention attendants back to the Bluff City, he learned of the material culprit that had pushed the spiritual gathering away: high airfares.

Pittsburgh is another example of a major city whose culture and economy is increasingly determined not by its underlying fundamentals but by the dictates of an ever more concentrated, yet failing, airline industry. After it lost most of its steel industry in the 1970s, the city did everything the apostles of the so-called new economy said must be done to compete in the emerging global economy. When the city played host to the G-20 Summit in 2009, President Obama hailed Pittsburgh’s transformation “from a city of steel to a center for high-tech innovation—including green technology, education and training, and research and development.” That same year Forbes named Pittsburgh one of America’s best cities for job growth, while the Economist lauded its cosmopolitan cultural amenities, such as the topflight Pittsburgh Symphony Orchestra and the Pittsburgh Opera.

But Pittsburgh’s renewal as a vibrant, creative, international city is now in doubt, due to the downscaling of its international airport, which now stands largely empty. Pittsburgh International was able to offer more than 600 daily nonstop flights after the city went deeply into debt to turn it into a showcase during the 1990s. But when US Airways merged with America West and concentrated its hub operations in Philadelphia and Charlotte, Pittsburgh service tumbled. US Airways’s daily flights have plunged from 542 to sixty-eight, causing the shuttering of half the gates at the airport as well as sections of two concourses.

K&L Gates, one of the country’s largest law firms, used to hold its firm-wide management meeting near its Pittsburgh headquarters, but after flying in and out of the city became too much trouble, the firm began hosting its meetings outside of New York City and Washington, D.C. The University of Pittsburgh Medical Center, the biggest employer in the region, reports that its researchers and physicians are increasingly choosing to drive to professional conferences whenever they can. Flying between Pittsburgh and New York or Washington can now easily take a whole day, since most flights have to route through Philadelphia or Charlotte. A recent check on Travelocity showed just two direct flights from Pittsburgh to D.C., each leaving shortly before six in the morning and costing (one week in advance) $498 each way, or approximately $2.62 per mile.

All these trends in the airline industry are bound to get much worse, and soon. Despite massive consolidation, steep cuts in wages and benefits, sharply rising fares, huge direct and indirect subsidies, and a slowly recovering economy, the industry remains unable to service its debt, and its executives—now serving at the whim of Wall Street— see no way out except to continue to merge and to cut capacity. U.S. airlines lost money in all but three years between 2001 and 2010, according to the industry’s trade group, for a cumulative net loss of $62.9 billion. Even before the recent bankruptcy of American Airlines, the value of all publicly traded U.S. airline stocks amounted to only $32.3 billion, less than that of Starbucks.

That number would be even lower were it not for the major subsidies the industry has extracted from Congress. These include not just the billions spent by state and local governments to construct and maintain airports, and the $15 billion in loan guarantees the industry received in the aftermath of 9/11. They also include tens of billions in unfunded pension liabilities that major airlines have shoved onto taxpayers by declaring bankruptcy, as United and US Airways did in the last decade and American Airlines is trying to do now. If American succeeds in its plan to shed its pension debts onto the federal government’s Pension Benefit Guaranty Corporation, that alone would amount to a bailout of more than $10 billion. Other U.S. airlines continue to benefit from special provisions passed by Congress in 2007 that allow them to underfund their pension plans, so in the future taxpayers are likely to be paying even more of the cost of flying yesterday’s planes.

Yet even though these and other public subsidies dwarf those provided to Amtrak or General Motors, only one U.S. airline, Southwest, still has an investment-grade credit rating. Since 1978, almost all new start-ups have either failed or been absorbed (remember People Express, ValuJet, and Air Florida?) and only one, JetBlue, remains as a national competitor. Meanwhile, all six of the major “legacy” carriers that were still flying in 2011 have gone through bankruptcy. When the final numbers come in for last year, the U.S. industry as a whole will probably show some net income, but as of the third quarter of 2011 the margin was razor thin, and was mostly the result of rising fares and canceled service. Adjusted for growth of the economy, airline capacity is now at its lowest level since 1979, according to the trade group Airlines for America, and the industry has announced plans to cut another 1.5 percent of available seat miles in the first half of this year.

Phillip Longman and Lina Khan collaborated on this article. Longman is a senior fellow at the New America Foundation and the Washington Monthly. Khan writes and reports for the Markets, Enterprise, and Resiliency Initiative at New America.

Comments

  • Barry Clark on March 13, 2012 12:05 AM:

    As a former major airline manager who was intimately involved in the transformation of the industry after deregulation, I feel that I am well qualified to speak to the issues raised in the article and I share many of the concerns that the authors raise. I have come to refer to the industry as a PCDM -- Perpetual Capital Destruction Machine.

    For the most part the article is a good objective review of the evolution of the airline industry since deregulation. But what a shame that all of the research and analysis that went into the article is called into question by gratuitous, unnecessary and inaccurate comments near the end of the article. And the authors do not provide any recommendations on how to resolve the underlying structural problems in the industry.

    Among the factors driving price declines that the authors indicate cannot be repeated, they list the busting of airline unions, the termination of pension plans,........ the diminution of seat sizes and legroom to a point approaching the limits of human endurance. (Eliminating seats altogether, however, remains an option.)

    I am not aware of any airline unions that have been "busted". There are situations where union members have elected to change the organization that represented them but overall I believe that a higher proportion of the commercial airline labor force has union representation today than at any time since deregulation.

    With respect to the termination of pension plans, there are relatively few that have been terminated. Many pension programs have been frozen as legacy carriers have used the bankruptcy process to restructure labor costs to enable them to stay in business and compete with new entrants who were able to start up without the financial burdens of the high cost pension programs that were established before deregulation.

    Among the major carriers seat sizes have not been reduced. The size of the airplane cabin width has not changed and airplanes with six economy seats in a row still have six seats in a row while those that had five seats still have five seats. The cabin comfort level of regional jets may be less attractive than mainline aircraft, but I would submit that those aircraft should be compared with small turbo-props rather than mainliners. Several carriers have introduced options where there is increased seat pitch available - albeit for a premium on the normal fares, the latest being American.

    While some carriers such as Spirit or Allegiant have crammed more seats into a standard aircraft, I would argue that they are offering a whole new class of service that is not comparable with standard scheduled air service. To the extent that seat pitch has been reduced for the industry at large, the reductions have invariably been achieved because of technological advances in seat design by seating manufacturers such as Recaro and Weber. These changes have enabled the depth of the structure of the seat itself to be reduced as evidenced by the recent configuration changes announced by both American Airlines and Southwest Airlines.

    Unfortunately the objectivity of the entire article is called into question by the patently stupid parenthetical comments that "(Eliminating seats altogether, however, remains an option.)" and "Nobody wins except a few fast-trading financiers flying in private jets."

    Finally I have to ask why the authors do not use their understanding of the issues to make recommendations for fixing the problems. Simple suggestions from within the body of their article would be to advocate the restoration of pricing regulation by the DOT or the assumption of regulatory oversight by the Interstate Commerce Commission. If you are going to document a major national economic development issue, why not propose a solution and start a dialog on what can be most effectively done to resolve it?

  • John Finn on March 13, 2012 3:08 AM:

    I think this article tells a lot of truth about the industry. I agree with the previous post that i wish the author would offer an explanation on how to fix the problems. I am a current airline pilot and i can tell u fist hand that it is rare to find any employee who is actually happy with their current job. Also you can see everyday that the very people we fly have become extremely irratated on how the airline industry as a whole treats them....nickel and diming them as much as the airlines can just to break even. Also the airlines have cut employee pay a lot over the years to save money. Its poverty level wages for most ground crew, flight attendants, and a lot of pilots. There is simply no class or grace in flying anymore. I do believe that since deregulation this industry has been in a downward spiral and maybe the only way to fix it is to regulate it again.

  • Andrew J. Lazarus on March 13, 2012 9:20 AM:

    Of course, in the days of regulation, Southwest Airlines was confined to intrastate flights in Texas. Fares were generally much higher. With higher fares and guaranteed profitability, of course airlines could give fancier meals. So what? It's rather ironic for an article ridiculing private jets and the 1 percent to celebrate the superior comfort of airline service that was exclusively for, say, the 3 percent.

    Why exactly is subsidizing CIncy's airport so much better an idea than subsidizing Iowa's corn farmers?

  • Dave S on March 13, 2012 10:02 AM:

    @Andrew - He mentions in this article that by the late 1970s, 63% of Americans had ridden in an airplane. So it seems likely that the old regulated system benefited more than the upper 3%... where did you get that derisive 3% figure from? (Nice try in attempting to paint the authors as elitists!)

  • Lina Inverse on March 13, 2012 10:03 AM:

    I find this analysis remarkably obtuse because it fails to factor in that only a fraction of the system was deregulated. Government monopolies still control airports and more importantly the nationwide air traffic control system, which is still using late 1940s (sic) technique (the technology had been improved, but not the way in which it is used). Both of these have resulted in artificial limits on the capacity of the system, which have to put pressure on where airlines choose to allocate their limited number of flights (e.g. congestion at hubs means fewer spokes can be serviced or serviced well).

  • Brett Ruiz on March 13, 2012 10:53 AM:

    Airline revenue per passenger mile has declined from an inflation-adjusted 33.3 cents in 1974, to 13 cents in the first half of 2010. In 1974 the cheapest round-trip New York-Los Angeles flight (in inflation-adjusted dollars) that regulators would allow: $1,442. Today one can fly that same route for $268. That is why the number of travelers has gone way up.

    Breyer, Stephen (2011-01-20). "Airline Deregulation, Revisited". Business Week.

  • PTate in MN on March 13, 2012 1:32 PM:

    The author DOES recommend a way to fix the problem. Unfortunately, if a reader is convinced that "government is always the problem, never the solution" the author's recommendation may make his head explode, so being blind to the recommendation may be the safe thing to do.

    Let me recap. As the author describes, the airline industry is structurally equivalent to the railroad industry, that is, a networked industry with high fixed costs; that is, it costs the same amount to provide service to Cincinnati as to New York, but New York is more profitable because volume is higher. A profit-seeking free-market approach will lead airline (or railroad owners) to 1) cut service to less profitable markets, and, 2) strive for monopoly control to maximize volume at the profitable markets. However, neither strategy is in the public interest. Cutting service leads to regional inequalities, and monopolies lead to arbitrary pricing.

    The solution that worked in the 19th century was to create government regulated monopolies. The author's recommendation is to do today what they worked then: "... when it comes to such natural monopolies that are essential to the public, there is no equitable or efficient alternative to having the government regulate or coordinate entry, prices, and service levels--no matter how messy the process may be."

  • Big River Bandido on March 13, 2012 1:39 PM:

    None of those cities would be having problems if we had a diversified transportation network, i.e. train service. Why are cities like St. Louis, Memphis and Cincinnati not served by passenger rail? Because the airlines and auto and tire manufacturers and construction companies wanted it that way.

  • Jeff on March 13, 2012 2:14 PM:

    I'm sure there's an obvious explanation for this, but why hasn't Southwest moved into Cinci and other high ticket price markets? These would seem like good opportunities for the only healthy air carrier existing today. ???

  • Davis X. Machina on March 13, 2012 2:59 PM:

    There is nothing we can do. It would be presumptuous to even try.

    Baruch atah ha Shuk, ha dayan emet.

  • Charlie on March 13, 2012 5:29 PM:

    I started reading this article and then noticed the front page article for this liberal rag argues that Obama has accomplished more than any other president. What a joke.

    Your article is dishonest: you mention that Dover, DE, Olympia, WA and Salem, OR are no longer served by commercial flights at their local airports and argue that this is some sort of tragedy. Olympia is suburb of Seattle and does not need its own airport. Dover is a short drive to Philadelphia and Salem is within an hour of Portland OR international airport. Why on earth would Salem (population ) require its own airport?

    The key problems with many of the airports mentioned in this article is that they (1) aligned themselves to a single major carrier, (2) took on huge debt to expand for that carrier and (3) the carrier merged or disappeared. Translated into English: these municipalities made poor business decisions which screwed over the residents in these cities. Put another way, the citizens elected the wrong people to represent them and these people borrowed money and the citizens are now stuck with the bill.

    When Pittsburgh was still a major hub for USAir it used to be cheaper to drive from Pittsburgh to Washington, DC and then fly to San Francisco than to fly direct from Pittsburgh to SFO. Why? Because USAir had a virtual monopoly on runway slots which reduced competition. Airport management screwed over their own citizens to attract a large carrier and create a huge airport that really wasn't required by the local population. The same is true of Cincinnati.

    Had these airport authorities (1) recruited multiple airlines to minimize their risk and create competition, (2) been more conservative in their airport expansion and (3) limited government spending to keep costs down and keep airport landing fees low none of these failing airports would be in the situation they are in today.

    Advocating more government control of the airline industry is a brain dead non-starter. Doing so would not in any way bring these failed management airports back. It would only create a system where airplane tickets cost more money. This is a typical liberal minded solution: create more government regulation. The problem is that the government regulation you advocate will never bring back the hubs to these cities.

  • Dan Johnson on March 13, 2012 10:05 PM:

    I think this is a must-read article for anyone interested in the role of transportation in a region's economic future. Well done. It's a very important lesson for those who represent mid-sized towns (and states without a top 10 city): the structure of the airline industry means that service will decline.

    I think one remedy to this structural problem is to build high-speed passenger-only railroad tracks connecting cities, towns and, when appropriate, their airports.

    That's why it is too bad the Tea Party wing of the GOP has decided to attack high speed rail investment, as they predominantly represent smaller and mid-sized towns that need it the most.

  • John on March 14, 2012 12:02 AM:

    @Charlie
    The problem with government that you state is not with the national or federal government but with local government. Each and every airport that over-expanded to accommodate a hub airport, such as Pittsburgh, was trying to attract and take economic activity from another airport. Thus local government competition led to poor decision making by the locality.

    However, now that the airlines are consolidating their hubs or merging, the idea to spend a lot of taxpayer money to attract an airline does not look so smart. A federal agency would presumably act as a referee in these cases of over-eager local governments and restrain the over building. A good case for government regulation, but on a national level.

  • Pat on March 14, 2012 2:35 AM:

    The physics and the energy issues will not go away.

    Other nations have shown the way. Use High-Speed Rail to connect cities that are within 400 miles of each other or about 3 hours via 200mph trains. Airplanes should only be use for long haul flights.

    Oil will continue to go up in price. At some point, and soon, the price of oil will be too high to make economic sense to fly less than 400 miles. The US can decide to build HSR now or it can continue to watch cities like Cincinatti be cut off.

    Ohio Gov John Kasich decided to let Cincinatti be cut off when he cancelled Ohio's HSR project. What about your state?

  • splashy on March 14, 2012 4:00 AM:

    This is an old story. There is a push to deregulate and privatize, giving the control to a small group of psychopaths who are addicted to money, leading to worse service and higher costs, leading to consolidation to "control costs," leading to worse service, along with less service, leading to entire groups of people being cut out of access to the service, leading to economic downturns where those people reside.

    It's happened in health care, they want to do it to the Postal Service.

    The really strange thing is that the people who are hurt tho most are the ones that vote in the people who do this to them.

  • AndrewB Lives on March 14, 2012 7:33 AM:

    Typical liberal thinking. The government could make things better, if only we put them smart people in charge. What a joke!

    People are flying less because it is too expensive (due to government) compared to alternatives like email, video conferencing, driving, local options, etc. I live in Cincinnati and life is better than ever - as long as you don't live in the city of Cincy - those morons are building light rail - the core will be Detroit soon - guess who runs the city - yep - Donks.

    Wishing for trains? What drivel.

  • Matt on March 14, 2012 9:39 AM:

    And yet we are the only large country that doesn't have a viable rail/hsr system...all because DC is full of bribe taking scum who fly private anyway.

  • Robert F. Ewald on March 14, 2012 10:36 AM:

    I cannot pretend to match the expertise of upper level airline management or the frequent business travelers who support the existing system. However, I have done enough flying over the past eighty years to have some basis for agreeing with the authors of this piece, and I do.

    On the other hand, over the past four years as a part-time customer service employee at a major airport, I have some hands-on insight into the problems in the system and recognize that the problems are not so simple or so easily fixed, either by big government, municipal government, agglomerated airlines, corporate ownership, or Wall Street financiers.

    Airlines and government regulation cannot be separated from airports. Airports cannot be separated from highway, train and bus access to the airport, traffic pollution, air pollution, noise pollution, hotel and restaurant accommodation, parking access and parking cost, security measures, customs and passport examination, weather and mechanical delays, retail shopping, charitable solicitation, misplaced baggage, lost possessions, long term and short term parking, schedule problems, bad weather and good weather, tourism, car rental, access to cruise ports, air cargo, fire and medical service, and my favorite -- clear, concise, and complete information.

    It isnt simply a matter of take-off and gate or passenger information. At major airports, it is also a matter of which airline in which terminal. Security for initial flights requires a one or two hour early arrival; perhaps three or more hours between flights; better make it five to be sure. Airline alliances and their code-sharing tricks may put you at the wrong terminal and the wrong gate. There will be another flight in four hours or maybe tomorrow. And thats only for passengers. What about family and business meeters and on-going ground transportation?

    It isnt simply a matter of New York City. It is also a matter of Newark, La Guardia, and JFK. How do you get to the seat of government? You get there via Dulles, Baltimore International, National, Union Station, I95 to the Beltway. When Midway couldnt hack it, we built O Hare. When we needed longer runways, we went into the countryside for space, but LAX has essentially put Palmdale, Ontario, Glendale, Long Beach, and perhaps Orange County airports out of business and is now indulging in billion dollar expansions and beautifications. LAX and SFO competed for the first A380 service by building longer runways and bigger gates, but can they continue to grow and grow and grow?


    Travel, including air travel, is a public necessity and convenience. It is as fundamental to our civilization as are health care, education, housing, agriculture, and national security. Neither capitalism nor socialism, neither democracy nor tyranny, can change the facts of geography. Whether Los Angeles is three hours (by SST), three days (by Amtrak), or three months (by Conestoga) West of New York, it remains three thousand miles. No matter how clever the advertising or how comfortable the seats, people must be able to get there. That need is too important to be left to the market place, venture capitalists, or frequent traveler programs. We can only hope that government regulation will be smart, but we know from the market place that airlines dont do it.

  • Michael on March 14, 2012 1:11 PM:

    I don't understand why the authors don't discuss pertinent information:

    1) and mid distance intercity train system would make a lot of short-haul flights redundant.
    2) Europe also has deregulation, but a lot of low cost carriers that are doing quite well at prices that appear to be less than in the US. Everyone here hates Ryan Air, which is a real bottom feeder, but there's EasyJet, Vueling, and so on that business people take. The key is that these fares are low because local governments subsidize them. If it's so essential for Pittsburgh or Cincinnati to maintain their airports, why can't they fork out cash to bring in Spirit or some other low-cost carrier?

  • Matthew Hall on March 14, 2012 11:46 PM:

    Cincinnati built and still owns a rail line from cincinnati to the south in response to this situation. It still earns $2 million a year for the city of cincinnati. Maybe Cincinnati could start a new airline based in cincinnati. Anyone interested?

  • AndrewB Lives! on March 15, 2012 1:02 PM:

    Magic Unicorn ThinkingWould you buy a car which only ran on tracks to predetermined destinations?Of course not!Liberals always want to spend other peoples' money to chase their utopian dreams. Wake up America!
  • Crissa on March 15, 2012 5:51 PM:

    Both of these have resulted in artificial limits on the capacity of the system, which have to put pressure on where airlines choose to allocate their limited number of flights (e.g. congestion at hubs means fewer spokes can be serviced or serviced well).

    That's not how the limit works. You have a limited number of flights in and out of any particular airport at any time. You do not have a limited number of airplanes in the air.

    Pulling flights from regional hubs lowers the total number of flights you can have. Which has nothing to do with regulation. Each airport mentioned here has additional capacity.

    Also remember that fees for flights are based upon ticket prices, they aren't actually flat. When the airline charges you for your bag, that's $25 they don't have to pay in taxes to support the air traffic control. When they charge you for a meal on the flight, that's money that isn't taxed to support the airports.

    I don't really understand the argument against regulation at this point... What, you want flights not to have air traffic control? You want them to use even more primitive tools? What are you trying to achieve?

    The biggest problem seems to be consolidation of airlines. Capital in capitalism seeks highest return, and that means that a company has a higher return by cutting off profitable endeavors. And that loans and capital are hard for smaller competition to get. All things which are anticompetitive and natural for a Capitalist system. Which is why we need regulation!

  • Ken Zapinski on March 19, 2012 11:16 AM:

    I cannot speak to the validity of the research and analysis in the overall piece. But the sections on Pittsburgh are full of inaccuracies, both large and small. Most fundamentally, US Airways decided to de-hub Pittsburgh International Airport roughly eight years ago. It was after that happened that passenger travel to and from Pittsburgh (O&D traffic) increased to record levels; that Pittsburgh's diversified economy began to outperform the national average in unemployment; that Pittsburgh was recognized as a world economic leader and awarded the G20 summit in September 2009.

    Travel to NY or DC does not consume a day, nor do most flights to those destinations go through connecting hubs in Philadelphia or Charlotte. On average, there are 9 daily nonstop flights to Washington's two airports (a market that is about four hours away from Pittsburgh by car) and another four to BWI. There are a combined 23 nonstop flights a day to the three airports in the New York market.

    The Pittsburgh region continues to work, as it has since 2003, to attract and maintain air service to ensure adequate connections to the global marketplace. But to assert, without any quantitative evidence, that Pittsburgh's "culture and economy is increasingly determined" by the behavior of the airline industry is absurd on the face of it.

  • Rick on March 19, 2012 11:36 PM:


    Anti-rail comments are ignorant. Poor transportation is bad for the country - not because it prevents a "utopia", but because it prevents ease of movement which directly impacts economic and business development. When it's easier for me to get from New York City to London than it is for me to get to St. Louis we have a problem.

    It is and we do.

    HSR is important. We shouldn't rely on air between NYC and Boston or DC.

  • DeJordy on March 20, 2012 9:23 AM:

    Jeff:
    Southwest has gone into some of the hub or former hub markets: Pittsburgh, Minneapolois, Dulles, LGA and Newark, and the grandaddy of them all, Atlanta.

  • Alex Marshall on March 20, 2012 12:41 PM:

    This was a wonderful article and I was happy to be quoted in it. Anyone interested can read two old columns of mine on the subject here
    http://www.salon.com/2005/04/16/airline_woes/ , and here http://www.governing.com/columns/eco-engines/Airport-Economics.html .

    I thought one of the principal value of the authors article was the frequent use of the term "networked system." This term deserves more play and discussion. It's a phenomena that is obviously true, once one grasps it. It is obvious with roads, for example, that while a small farm to market road may no longer give much value on its own, it adds value to the system by enabling travelers to go to and fro big places and small places. Even the biggest highway would be less valuable if it no longer went to some of the smaller cities. Wisely, no one is proposing that we tear up the smaller roads because they don't serve enough people. Unfortunately, that's what is happening with air service.

  • POed Lib on March 20, 2012 2:43 PM:

    I live in Sioux Falls, SD. There is almost no city in the country with worse service and more expensive service than Sioux Falls. We are a small city but getting ANYWHERE costs huge money. That is because airlines make Sioux Falls and all small cities pay for the convenience of people in Chicago, Atlanta, and Boston to have cheap flights. Since we have limited competition, airlines charge huge amounts here, so they can turn around and compete in Chicago. It's outrageous.

  • Scott Petersen on March 20, 2012 4:47 PM:

    It's interesting to me that critics in these comments predominantly use ad hominem attacks, such as "typical liberal thinking" or "liberals always want to spend other people's money," etc. rather than facts or logic. It also astounds me that many of these same critics take the authors to task for not offering solutions. It's fairly obvious to me that the authors support re-regulating the airlines as the solution to the multitude of problems in air travel. I mean, have any of you critics flown recently? Besides the high fares, multitude of new fees, the delays, the crowded, uncomfortable flights and generally poor service, deregulation has worked just fine, right? So, tell me, righty geniuses, what's your solution? Let me guess: the free market will solve all problems, all the time. Sure it will. It's worked wonders with the airlines so far.

  • David on March 21, 2012 7:34 PM:

    This article lost me at the beginning when it describes the trials and tribulations of Chiquita trying to fly wherever from CVG and thus CLT with its USAIR Hub and int'l flights was chosen. Hmmm, while it is true that CLT has more international flights than CVG..it has far less international service than ATL..or MIA...or DFW...or the list is long. Also the int't destinations from CLT are heavy on tourist spots not so much on the business spots.

    Maybe the $22M the sate of NC offered helped? Am sure even more helpful were the white shoe consultants who can't stand to connect anywhere.

    The true reality...CVG is only one hour away from ORD, ATL, DTW and 1/5 away from JFK and all the international flights they would ever need. Chiquita and other businesses are not so important and pricey they can't easily justify an extra hour or two on an int'l flight.

    Am certain they are making connections in MIA or ATL or JFK from CLT to go to SA...cause those flights are not available at CLT.

  • Alex on March 26, 2012 10:57 AM:

    I agree with others that Chiquita's PR tactic of blaming the airport for its decision to move rings hollow. If they truly were solely interested in convenient air service to Latin America they would have moved to Atlanta, Houston or Miami, cities that are major international hubs for Latin America and the Caribbean.

    What makes a lot more sense is the fact that Chiquita is taking $22 million in incentives from state and local taxpayers in Charlotte and N.C. to relocate. Blaming the airport at CVG is just the PR spin, which was clearly accepted uncritically by the authors, who didn't even mention the relocation incentives. Were they even aware of them?

    In addition to this significant oversight, the article is riddled with errors as well:

    - American Airlines is not planning on terminating their pension plans - they've specifically said they plan to maintain them and will not dump them on the PBGC.
    - JetBlue is not the only startup since 1978 that still exists - Spirit Airlines was founded in 1980 and continues to expand.
    - The authors refer to a large scale "busting of airline unions." The airline industry is heavily unionized, so I'm not sure what unions have been broken or disbanded.

    These and the errors about Pittsburgh service pretty much invalidate this piece, frankly. Next time I suggest the authors do some basic research before publishing - it will go a long way toward restoring your credibility.

  • Glen on March 29, 2012 3:20 PM:

    A recent check on Travelocity showed just two direct flights from Pittsburgh to D.C., each leaving shortly before six in the morning...

    During the week of April 8-12, 2012, there are actually thirteen nonstop scheduled flights operating between Pittsburgh International Airport (KPIT) and the three major Washington, D.C. airports (five nonstops to KDCA Reagan National on US Air, four nonstops to KIAD Dulles International on United and four nonstops to KBWI Baltimore-Washington International on Southwest).

    Simple fact checks show that many of the other claims made by Longman and Khan about the state of air travel in America are simply wrong or grossly misleading. For example, they blame deregulation for the lack of airline hubs in St. Louis, Memphis and Pittsburgh. But hub and spoke domestic airline networks didn't come into existence until after deregulation. Up until the mid-1970s, U.S. airlines operated mostly point-to-point air service, where routes, schedules and prices were dictated by politicians in Washington, D.C. working hand-in-hand with industry lobbyists. No city had the sort of air service that hub cities enjoy today, and a typical domestic trip by air cost well over $2,000 (in 2010 dollars). To fly to Europe, once had to change planes and airlines at JFK Airport in New York — because regulated domestic airlines weren't permitted to fly internationally and European airlines couldn't land at U.S. “domestic” airports.

    Washington Monthly obviously speaks for the mandarins who believe that everything would work better if only “experts answerable to the public” ran the world. They also fervently believe that without a trusted cadre of well-meaning experts, a hapless public would be raped in the service of “corporate boardrooms and Wall Street.” Fortunately, markets self-organize. We'll all do just fine without you.

  • low-tech cyclist on April 02, 2012 2:29 PM:

    Like others have noted, it's much easier to fly between Pittsburgh and the DC area than the article's authors claimed.

    It's also a lot cheaper: I just checked Southwest's flights between Pittsburgh and BWI, flying from Pittsburgh to BWI tomorrow morning (April 3), and back on Thursday evening (April 5). Cost? $191 each way, not $498.

    The problem with DC-Pittsburgh travel is that it's a long and tiring drive (4 hours doesn't sound bad, but it's a particularly wearing 4 hours over the Appalachian range), and it's too short a distance considering time spent going through security, waiting for the plane at one end and luggage/rental car at the other, and travel between airport and origin/destination at both ends.

    The solution, in a country where there were two rational political parties, would be high-speed rail between the two cities. It wouldn't even have to be very high speed: even a 90-mph average would beat the heck out of either driving or flying between the two cities.

  • low-tech cyclist on April 02, 2012 2:32 PM:

    The problem hasn't been deregulation. Deregulation has taken air travel from something that was mostly something that the richest 20-25% of Americans did, and made it accessible to anyone.

    There have been two problems, really:

    1) No antitrust enforcement (most of the story seems to be about hubs going away, as the result of fewer airlines); and
    2) legacy airline management that seems to be too stupid to figure out what Southwest is doing right, and doing likewise.

  • R. Michael Baiada on April 02, 2012 8:16 PM:

    Like everyone else, this article continues to ignore Business 101, production inefficiencies and the dismal quality within the airline industry?

    Deregulation was not the cause of the airlines problems, but an enabler that allowed airlines to expand to the point that their unmanaged production process continues to destroy their quality and value. Nor is the primary problem the ATC system, fuel or labor.

    Regardless of the industry, any complex, interdependent production process, left unmanaged, will eventually fail. In this case, bigger, something deregulation allowed to happen within the airline industry, is definitely not better.

    The fact remains that the airline�s unmanaged production process continues to deliver 80% of the product off schedule, and upwards of 40% late, costing individual airlines Billions each year. For an airline to be successful, this must be fixed.

    Unmanaged complexity, and the resultant production variance, is the primary reason that airlines have gone bankrupt.

    Further the airline�s grossly inefficient production process and dismal quality skews the airline cost base to the extent that they incorrectly believe that they can�t compete domestically. When 15% to 20%, or more, of a company�s productive utilization is �buffer�, and the quality is dismal, no company, in any industry, can survive. In other words, airlines burn fuel and pay labor 15% of the time to work hard, yet produce no product. Not a sustainable business model, especially in a capital intensive industry like the airlines.

    For a lesson in history, airlines should look at the US automobile companies in the 1980. The Big 3 incorrectly believed that their cost base prevented them from competing in the US small car market, which they abandoned for the higher margin, large car market. The result was that, as Southwest is doing today, Toyota and Honda established a quality base in small cars, and then preceded to attack the large car and truck market.

    We all know how that turned out. The cost of the Big 3�s abandonment of the US small car market, to the automobile industry and the US economy, was disastrous.

    And while I agree that �the industry remains unable to service its debt, and its executives�now serving at the whim of Wall Street� see no way out except to continue to merge and to cut capacity�, there is a solution � Operational Excellence.

    Only by putting their assets and product where it needs to be, when it needs to be there, day after day, will airlines actually turn the corner. Unfortunately, while moving to Operational Excellence is actually easy to accomplish, will reduce costs and increase quality and revenue, it is not being done.

    R. Michael Baiada
    President
    ATH Group, Inc.
    PO Box 794
    Evergreen, CO 80437
    Tel - (303) 674-0229
    michael.baiada@athgrp.com

  • Matthew Hall on April 06, 2012 12:26 PM:

    These forums are becoming opporunities for people to advertise their business services.

  • stlhoosier on April 24, 2012 6:08 PM:

    Minneapolis???? Is that a joke to throw MSP in with STL, MEM, and PIT?

    MSP airport is Delta's third biggest hub (with over 400 daily flights) and flights to Europe (London, Amsterdam, and Paris) and even to Tokyo.

  • Eric Bruun on April 30, 2012 8:42 AM:

    Two comments:

    The authors didn't explain in enough detail, but their point is essentially correct about high fares out of Pittsburgh. It costs 1000USD for a next-day non stop return ticket to DC when I checked on 30 April. If you want to pay only about 400 you must go through a connecting flight, and many of which at least one direction is very early in the morning. LAX to DC next day was less!

    "Union busting" was perhaps too strong of a term, since the unions still exist, but it is not exaggerating to say that, unionized or not, many airline jobs no longer pay a living wage. Read Sully Sullenberger about what happened to his pension. I also note that former airline executives are going to put the best possible light on what was actually government-sanctioned theft of their employees contributions to their pension funds.

  • Mtffgrtfg on September 03, 2012 4:00 PM:

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