For the week of January 16 - 22, 2002

Now we coddle 
those we cursed

Commentary by ADAM TANOUS

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The airline industry is poorly run. And $15 billion will not fix it. A bailout will likely have the opposite effect.

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As so many have said to little effect: things will never be the same after the Sept. 11 terrorist attacks. If that were truly the case in the airline industry, I might believe something positive came out of the plane crashes. Sadly, I think what’s in store for us is more frustration with an industry that has repeatedly failed us.

What’s worse is that in the wake of the terrorist attacks, the Bush administration and Congress have agreed to give the airlines a $15 billion bailout: $5 billion in direct payments and $10 billion in loan guarantees.

Surely it was coincidence that legislators who took the lead on this bill, House Majority Leader Dick Armey (R-Tex.), Majority Whip Tom DeLay (R-Tex.), Minority Leader Richard Gephardt (D-Mo.) and Speaker Dennis Hastert (R-Ill.), all have major airline operations in their states.

Granted, that kind of pork barrel politicking happens all of the time. But to witness such largesse being heaped on an industry that has had it coming long before Sept. 11 is a bit much to take.

The airline industry is poorly run. And $15 billion will not fix it. A bailout will likely have the opposite effect. We are simply rewarding poor performance.

Here is how I think the airlines have failed us:

Service. I won’t bore you with personal horror stories about the airlines. Everyone has them. Stories of people being stranded on runways for hours without food or water. Stories of flights canceled, vacations ruined, meetings missed. Stories of indifference, stories of delays. Reservations mangled. Baggage touring the U.S. without its owner.

I suppose the flight attendants and pilots do their jobs adequately. It is all of the other support personnel that fail us. They seem to begrudge the fact that they are in the service industry.

I am convinced that one reason service suffers is there is no recourse for customers. Carriers just shrug off complaints, because they know there is little customers can do. Say you live here and have had a bad experience, or several for that matter, with Delta. It is said people vote with their checkbook. But how do you take your business elsewhere if there is no elsewhere?

Ultimately, we live with a double standard. We allow the airlines all kinds of flexibility. They change flight times, prices, cancel flights—whatever action suits their needs. But then when the consumer tries to change anything he is punished severely. We suffer inconvenience twice: first by playing by their convoluted rules and a second time when they change the rules.

Pricing. The airline pricing system may be elegant in the minds of software designers or bean counters, but it is a mind-boggling labyrinth to everybody else. The variation of prices of seats on a given airplane, no doubt, has logic behind it. But the public is never privy to that logic, nor can it make rational economic decisions—theoretically what would be best for the airlines and the market—because the pricing system is so convoluted and seemingly unfair. One might call on Monday and get price x and then call on Tuesday and get price y. X might be bigger than y, or vice versa. As far as the consumer goes, it is a random crap shoot.

Hub system. The hub system is another construct that probably has logic to it, but it effectively sets up monopolies in the industry. United controls Denver. Delta controls Salt Lake City. American controls Dallas-Fort Worth. Allowing a given airline to control an airport reduces competition and effectively raises prices for consumers. Service usually suffers as well.

Weather. Agreed, we can do little about it. But the way airlines schedule their crews and airplanes can be changed. As it stands now, a lightning storm at Chicago’s O’Hare Airport can cause flights in Boise and San Francisco to be delayed or canceled. Those delays and cancellations can, in turn, mess up flights in another part of the country. It is a cascade effect that is particularly frustrating, especially to people two or three airports removed from the original problem. Airlines cut it as close as they can with crews and equipment. Any ripple in the system has a way of creating a harmonic oscillation of problems down the line.

Frequent flier system. It is the quintessential bait and switch scam. You might actually rack up enough credit card debt to finally qualify for a free ticket. But good luck trying to book that free, frequent-flier ticket. The airlines set aside very few such seats per flight. And people that are wise to the system call the minute the flights become available, often at midnight, six or seven months in advance of the flight date.

Security. I have no qualms about blaming the airlines for the recent breaches of security, including the Sept. 11 events. Up until now, airlines have been responsible for security; it has been their responsibility to hire the security firms that protect access to the terminals, tarmac and airplanes. The approach the airlines have used is to hire the lowest bidder: good thinking if you are buying widgets, bad thinking if you are buying a service like security. Do we really expect sophisticated security from people who are paid $6 per hour? Making split-second decisions about guns and knives that may or may not be on those grainy x-ray monitors does not seem like trivial work to me.

How have we ended up with such a sorry state of affairs?

We’ve allowed merger after merger until suddenly we are stuck with three huge carriers—United, Delta and American—who face little, effective competition from each other or from smaller carriers.

Once airlines get that big, we are held hostage to them in many ways. We overlook their failings, because we are loathe to let them go bankrupt. The threat of their failure becomes an asset for the airlines when it comes time for them to bargain with lawmakers or regulators.

My recommendation: Let ‘em fail. Let ‘em all fail. The beauty of America is that someone will quickly fill the vacuum. Dozens of scrappy men and women will come up with business plans and philosophies that will work. How can we possibly do worse than with what we have now?

 

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