Failing Airlines, Failing Government
Surveying the decline of the airline industry, retired American Airlines CEO Bob Crandall said something this month that both presidential candidates should take to heart: "The United States used to be good at solving problems. These days, we don't seem up to the job."
Crandall was talking specifically about our national failure, in the 30 years since deregulation, to build an air transport system that works. What we have now is a complete mess -- a system that bankrupts carriers, embitters workers and infuriates the traveling public. But hold off on airlines for a moment and ponder his larger point.
Take any big issue that matters to the public -- from immigration to energy to health care to fiscal policy -- and what you see is a failure of government. The logjam in Washington is so complete that Congress and the executive branch are paralyzed, unable to do the public's business. That problem has been growing for several decades, but now it's a national disaster.
Politicians spend their time railing about the evils of Washington insiders, but the truth is we could use a few more of those inside-the-Beltway Lucifers right now -- at least the kind who know how to pass legislation and make things work. As things stand, we are devaluing the tools of public policy and losing our ability to solve problems.
Back to the airlines, which offer an especially interesting case of public-policy failure: When the industry was deregulated in 1978, most airlines were opposed, arguing that the air transport system was a kind of public utility and that although competition might cut prices, it would erode service and forestall capital spending for new, more efficient planes.
Crandall argues that the critics' worst fears have been realized. "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. . . . Airline service, by any standard, has become unacceptable," he said in a speech on June 10 to the Wings Club in New York.
Sharply rising jet fuel costs, the airlines' latest catastrophe, have prompted new desperation measures, such as charging for checked luggage. That's a stunningly bad idea because it will encourage customers to bring ever-larger carry-on bags, making flight attendants even crankier and travel more unpleasant. But that's where this industry is -- in a perpetual downward spiral.
The industry's woes are documented in statistics gathered by the Air Transport Association. Since deregulation, nearly 200 airlines have come and gone -- most of them the low-cost, nonunion carriers that were going to be the industry's salvation. Turns out they didn't have the capital to survive. The high-cost "legacy" carriers such as United and Delta have cut labor costs (in part by using the bludgeon of bankruptcy), but those savings have been devoured by higher fuel costs.
You can argue that consumers have benefited from the mess in that ticket prices remain fairly low. The cost of domestic travel has gone up just 52 percent since 1978, compared with a 218 percent increase in the consumer price index. But otherwise, the U.S. industry has been a total loser. The market capitalization of Lufthansa today is 60 percent greater than that of American, Continental, Delta, Northwest, United and US Airways -- combined.
Crandall's answer is a modest version of re-regulation, which recognizes the public-utility aspect of air transport. He would require that ticket prices cover the full cost of all the connecting flights -- a measure that would probably doom the cumbersome "hub-and-spoke" system he once championed. He would also control the proliferation of takeoff slots at crowded airports and prevent carriers from using bankruptcy laws to impose changes on their workforces. Interestingly, the big airline unions basically agree with Crandall, a man they once despised as a management bully.
We see what's wrong with the air transport industry every time we go to the airport. It's dying a slow, painful death -- and we're all caught in the downdraft. But how could it be otherwise? We have no national energy policy that could moderate fuel costs; we have no national transportation policy that could rebuild an efficient, well-capitalized system. We just watch, and complain, as it all gets worse.
We speak of the airline industry as a market failure, but in a deeper sense, it's a political failure. The next time you're stressing in an airport, ask yourself why government doesn't start helping to fix this mess.