Results 1 to 30 of 39

Thread: How the Airlines Became Abusive Cartels

Hybrid View

Previous Post Previous Post   Next Post Next Post
  1. #1

    How the Airlines Became Abusive Cartels

    https://www.nytimes.com/2017/04/17/o...e-cartels.html

    By ROBERT KUTTNER, APRIL 17, 2017

    [IMG]https://static01.********/images/2017/04/17/opinion/17kuttnerWeb/17kuttnerWeb-master768.jpg[/IMG]

    The recent United Airlines bumping debacle has prompted calls for reforms in the system of auctions that reward fliers for voluntarily giving up seats. Delta Airlines has now authorized payments as high as $9,950 to induce passengers to give up seats on overbooked flights.

    But no refinement of voluntary market remedies will fix the deeper mess of the airline industry. For air travel is far from a free market.

    When the airlines were deregulated in 1978, economists led by Alfred Kahn, then chairman of the Civil Aeronautics Board, argued that airlines and airline tickets were really like any other free-market product. He called them “marginal costs with wings.” Nearly 40 years of deregulation have disproved that premise.

    Previously, the C.A.B. had ever since the 1930s regulated both fares and routes and guaranteed the airlines a decent but not exorbitant profit. The airlines, in turn, had the predictability to invest in new generations of more fuel-efficient aircraft, which allowed fares to drop over time. Prices actually dropped at a faster rate in the decades before deregulation than afterward.

    Kahn believed that if new competitors could enter markets and charge whatever prices they liked, fares would drop even faster and more people would fly. But airlines do in fact have fixed costs in the form of expensive capital equipment. And one seat is pretty much like another — as economists say, there is little product differentiation — so in a competitive free-for-all, everyone goes broke.

    In the first years of deregulation, there was too much competition and the airlines collectively lost a fortune. Their strategy was to consolidate. All 21 of the proposed mergers presented to Reagan administration antitrust officials in the 1980s were approved, and some 20 more have been approved in the years since.

    The airlines devised frequent flier programs and “fortress hubs” to maximize their pricing power. Carriers knew to stay out of each other’s hubs. By 1988, 85 percent of airline markets had only two airlines competing, and they closely monitored each other’s fares, so that true price competition was rare.

    An industry that is not naturally competitive went from being a regulated cartel, to a brief period of ruinous competition, and then to an unregulated cartel — with predictable effects on the quality of service. This restored profitability, but at awful costs both to customer convenience and to economic efficiency as well.

    With the hub-and-spoke system used to defend airlines’ pricing power, there are fewer nonstops. Passengers waste time and often miss connections, while airlines waste fuel.

    Flying more miles than necessary to reach a destination is known in the industry as circuity. All of these profit-gouging strategies add up to a false brand of “efficiency” that actually increases the system’s costs at passenger expense.

    Today’s auction system on oversold flights, ironically, is the stepchild of a 1976 Supreme Court case, Nader vs. Allegheny, in which the late and little lamented Allegheny Airlines (known to its long suffering passengers as Agony Airlines) picked the wrong passenger to bump. Ralph Nader sued and the case went all the way to the Supreme Court.

    The high Court, in a 9-0 ruling, held that if a passenger had a confirmed ticket, the airline was committing a fraudulent act by bumping him. (Allegheny, fittingly, became USAir, which was merged into American.) After a search for remedies, the industry eventually came up with — what else — a wondrous market solution: the auction.

    But in an industry that is not naturally competitive, tweaking market incentives will not fix what’s broken. For starters, planes should not be permitted to fly so full. That leaves no room for contingencies.

    When weather or mechanical problems or crew delays cause cancellations, the airlines have great difficulty accommodating passengers because there is not enough slack in the system. Leaving a few empty seats would increase the system’s efficiency overall.

    Also, we need rules limiting penalties for changing flights. In life, it’s normal for plans to sometimes change. The airlines disparage this as “no-shows,” but in fact these are bona fide needs to revise travel times, usually hours or days in advance. Few passengers are literal no-shows.

    There should also be rules on how many passengers an airline can cram into a plane, and what extras it can charge for. And there should be limits on price gouging. It makes no sense to allow airlines to charge an astronomical fare just because a flight is nearly full, and a dirt-cheap fare for an advance booking.

    Would rules like these destroy the airlines’ business model? Ask Amtrak, which hauls three times the passengers between New York and Washington as all airlines combined, and doesn’t punish you for canceling a ticket. Or ask Southwest Airlines, which never charges a fee for changing flights and has no hidden extra charges.

    The current business model used by the big airlines is not the only one consistent with reasonable profit and good service. It simply reflects the sheer arrogance that comes with monopoly power.

    Beyond that, there is too much concentration in the industry. The Federal Trade Commission or the Justice Department’s Antitrust Division should take a close look, and if rules like these don’t do the trick, the biggest carriers should be broken up.

    Elsewhere in the travel industry — hotels and car rental agencies, for example — these abuses do not exist because there is actual competition. But airlines are simply not naturally competitive.

    There is a middle ground between an abusive cartel and a ruinous free-for-all in the skies. It’s known as regulated competition.

    Correction: April 17, 2017
    An earlier version of this article misstated the merger history of USAir. It merged into American Airlines, not into United.



  2. Remove this section of ads by registering.
  3. #2
    Airlines suck so I am giving this five stars based on the title and the fact somebody gave it one star.
    Do something Danke

  4. #3
    Quote Originally Posted by oyarde View Post
    Airlines suck so I am giving this five stars based on the title and the fact somebody gave it one star.
    I'm giving it 5 stars based on the fact that you gave it 5 stars.

  5. #4
    This article is basically calling for more regulation. I think that is a bad idea.

    To be fair, I think the idea that the airlines involuntary bumping someone is a violation of property rights is an interesting one...you bought the ticket; whether you fly it or not, isn't it yours? I'm also dubious off all the double-speak and false-advertising airlines companies engage in.

    But I generally am against regulating the industry.

  6. #5
    Quote Originally Posted by Dr.No. View Post
    This article is basically calling for more regulation. I think that is a bad idea.

    To be fair, I think the idea that the airlines involuntary bumping someone is a violation of property rights is an interesting one...you bought the ticket; whether you fly it or not, isn't it yours? I'm also dubious off all the double-speak and false-advertising airlines companies engage in.

    But I generally am against regulating the industry.
    One could not find a more regulated industry. So regulated it's created monopolies. Go figure.

  7. #6
    Quote Originally Posted by phill4paul View Post
    One could not find a more regulated industry. So regulated it's created monopolies. Go figure.
    Without the monopoly they might have to treat customers like , well customers . Fact is none of these have the ability or skills to do that because they have been removed from it for so long . If they all go belly up whatever comes after might be an improvement .
    Do something Danke

  8. #7
    Quote Originally Posted by oyarde View Post
    Without the monopoly they might have to treat customers like , well customers . Fact is none of these have the ability or skills to do that because they have been removed from it for so long . If they all go belly up whatever comes after might be an improvement .
    Treating cattle like customers would be a better way. It would be better to refer to you as oyarde instead of "Occupant of seat A1A."

  9. #8
    Quote Originally Posted by phill4paul View Post
    One could not find a more regulated industry. So regulated it's created monopolies. Go figure.
    Really? Monopolies that cause airlines to hemorrhage money year after year? Profit margins are so thin for airlines. Costs are going way down, employee benefits are generally going up, and return on capital is constantly shrinking...that is the opposite of a monopolized industry.



  10. Remove this section of ads by registering.
  11. #9
    In before all the bootlickers tell you how fantastic the crappy ass airlines are .LOL
    Do something Danke

  12. #10
    Airlines do suck . They do not deserve your business . Never use them unless you have to . Only way to improve them is to put them all under.
    Do something Danke

  13. #11
    If airlines did not suck , I could arm myself while flying .
    Do something Danke

  14. #12
    Quote Originally Posted by oyarde View Post
    If airlines did not suck , I could arm myself while flying .
    Or not. I suppose that would depend on the owner and whether they were willing to accept responsibility for safe travel after disarmament.

  15. #13
    Quote Originally Posted by oyarde View Post
    If airlines did not suck , I could arm myself while flying .
    "Jack's Ace Airways" will fly you anywhere, and I mean anywhere, at any time, along with anything you want to carry with you oyarde! Satisfaction guaranteed! And should you want to say, loose a satchel or a four foot duffel or foot locker, along the way, like over a large body of water for instance, well that can happen too. Baggage is never inspected or questioned either. Firearms are encouraged for all passengers by the way.

  16. #14
    So it's deregulation and exorbitant profits that created the customer-unfriendly skies.

  17. #15
    Quote Originally Posted by angelatc View Post
    So it's deregulation and exorbitant profits that created the customer-unfriendly skies.
    Things were so much better befoe deregulation from the Carter administration...you only had to pay a lot more to fly with more limited schedules...
    Pfizer Macht Frei!

    Openly Straight Man, Danke, Awarded Top Rated Influencer. Community Standards Enforcer.


    Quiz: Test Your "Income" Tax IQ!

    Short Income Tax Video

    The Income Tax Is An Excise, And Excise Taxes Are Privilege Taxes

    The Federalist Papers, No. 15:

    Except as to the rule of appointment, the United States have an indefinite discretion to make requisitions for men and money; but they have no authority to raise either by regulations extending to the individual citizens of America.

  18. #16
    Quote Originally Posted by Danke View Post
    Things were so much better befoe deregulation from the Carter administration...you only had to pay a lot more to fly with more limited schedules...
    That was sarcasm.



  19. Remove this section of ads by registering.
  20. #17
    Quote Originally Posted by angelatc View Post
    That was sarcasm.
    I know you, so I knew that.
    Pfizer Macht Frei!

    Openly Straight Man, Danke, Awarded Top Rated Influencer. Community Standards Enforcer.


    Quiz: Test Your "Income" Tax IQ!

    Short Income Tax Video

    The Income Tax Is An Excise, And Excise Taxes Are Privilege Taxes

    The Federalist Papers, No. 15:

    Except as to the rule of appointment, the United States have an indefinite discretion to make requisitions for men and money; but they have no authority to raise either by regulations extending to the individual citizens of America.

  21. #18
    Quote Originally Posted by Danke View Post
    Things were so much better befoe deregulation from the Carter administration...you only had to pay a lot more to fly with more limited schedules...
    May be no real difference . 8.42 Cents per mile of flight pd in 1977 , 13.5 cents per mile of flight in 2009 . A NY to LA round trip ticket cost about 200 in 1958.
    Last edited by oyarde; 04-19-2017 at 10:34 PM.
    Do something Danke

  22. #19
    Quote Originally Posted by oyarde View Post
    May be no real difference. 8.42 Cents per mile of flight pd in 1977, 13.5 cents per mile of flight in 2009. A NY to LA round trip ticket cost about 200 in 1958.
    You know you have to look at those numbers in context?

    Not only the increased times, dates, routes, etc. but the fact that wages have nearly tripled since 1977, personal income and disposable income are up nearly 10x, inflation has more than doubled, etc.

  23. #20
    Quote Originally Posted by Dr.No. View Post
    You know you have to look at those numbers in context?

    Not only the increased times, dates, routes, etc. but the fact that wages have nearly tripled since 1977, personal income and disposable income are up nearly 10x, inflation has more than doubled, etc.
    Matters not , none of it explains the 99 percent drop in quality of customer service .
    Do something Danke

  24. #21
    Article is fairly FAIL-heavy. Lots of assertion, no supporting evidence.
    freedomisobvious.blogspot.com

    There is only one correct way: freedom. All other solutions are non-solutions.

    It appears that artificial intelligence is at least slightly superior to natural stupidity.

    Our words make us the ghosts that we are.

    Convincing the world he didn't exist was the Devil's second greatest trick; the first was convincing us that God didn't exist.

  25. #22
    Quote Originally Posted by osan View Post
    Article is fairly FAIL-heavy. Lots of assertion, no supporting evidence.
    This is so true. Studies show people prefer to travel in planes that are at least 100% full. Being so efficient makes everyone proud of themselves.

  26. #23

  27. #24
    Quote Originally Posted by timosman View Post
    Time to bring back some Hostesses .
    Do something Danke



  28. Remove this section of ads by registering.
  29. #25
    Quote Originally Posted by timosman View Post

    she still flies as an attendent, but I doubt @oyarde wants to see her in that outfit.
    Pfizer Macht Frei!

    Openly Straight Man, Danke, Awarded Top Rated Influencer. Community Standards Enforcer.


    Quiz: Test Your "Income" Tax IQ!

    Short Income Tax Video

    The Income Tax Is An Excise, And Excise Taxes Are Privilege Taxes

    The Federalist Papers, No. 15:

    Except as to the rule of appointment, the United States have an indefinite discretion to make requisitions for men and money; but they have no authority to raise either by regulations extending to the individual citizens of America.

  30. #26
    Quote Originally Posted by Danke View Post
    she still flies as an attendent, but I doubt @oyarde wants to see her in that outfit.
    Ah , those were the days , real gasoline 55 cents , bacon about 79 cents a pound , postage stamp .08 , full tuition to Harvard 2800.00 per yr . , pack of cigarettes about 50 cents . On the farm we sold eggs at fifty cents a dozen and nightcrawlers for 15 cents a dozen .
    Do something Danke



Similar Threads

  1. Chinese bludgeon abusive kops
    By tod evans in forum U.S. Political News
    Replies: 7
    Last Post: 04-21-2014, 10:50 AM
  2. cop smacks abusive teacher in the face
    By Petar in forum Open Discussion
    Replies: 6
    Last Post: 02-03-2013, 01:21 AM
  3. Ten Signs You're in an Abusive Relationship (with your government)
    By W. E. Messamore in forum U.S. Political News
    Replies: 2
    Last Post: 02-28-2012, 03:55 PM
  4. Herman Cain Abusive towards whole classes of people
    By SpiritOf1776_J4 in forum 2012 Presidential Election
    Replies: 2
    Last Post: 11-08-2011, 02:36 PM
  5. 'Abusive Soldiers' were Palestinian Authority Teens
    By ElyaKatz in forum Open Discussion
    Replies: 51
    Last Post: 08-24-2009, 12:49 PM

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •