Originally Posted by
fastair
Those objections were all stated a few weeks ago.
As for why they de-regulated...sure it increased competition as well as opened up the industry to market forces. Well, by the same logic, mergers are part of the market forces. If congress deregulated, then let market forces prevail, and allow the mergers to happen and airlines to sink or swim. They want their cake and they want to eat it too. Much competition from deregulation, but also hub and spoke systems for coverage to all the tiny cities that a LCC will never touch.
I tell you this, if the congressman from MN had to choose between losing 10's of thousands of jobs in his state and fewer non-stop flights/service, or higher fares but better route structure in MSP, becuase NW could CHap 7, do you think he would change his song?
De-regulation has its consumer benefits, but true de-regulation allows free market successed and failures including Chap 7 and mergers.
Similarly RLA was in place to protect the delivery of goods and service necessary to the Fed (i.e. mail) and and the economy. It now stands as a de-railing point to the free market forces that would allow strikes and evolution of the industry. How can they say "we ALLOWED" economic forces to play in the 1970's? It isn't a RIGHT of American's to have air travel. There is no national Monopoly like ATT back in the 1980's in the aviation sector (at least in the US.) Margins of even the most profitable air carriers are NOTHING like margins of most sectors. It is a very capital intesive industry that has produced a historical negative return to those willing to provide the capital. Why should "The Man" expect to be able to force low fares, great networks, and losses for the investors year after year? Either re-regulate like a utility, or stay out out of the business (beyond regualting anti-trust concerns) then, maybe we could have a profitable national network with good service and premium products (and high fares) like some of the other countries have had.
There has been loads of consolidations - US Air was once Piedmont, Allegheny and America West. Who knows what happened to Eastern Air Lines? TWA is now American. Pan AM is gone. These were the titans when the markets were deregulated. The problem is not regulation, the problem is poor management and unions. First they gave too much then they went bankrupt and took too much back.
If you look at SouthWest, they are being hurt by high fuel costs, but they have been very profitable because they haven't tried to be all things to all people. No first class, no international, no frills but profit. Frontier was growing and then went international and is now trying to sell some of its airplanes.
I think you have a tough hill to climb saying that the problems in the industry are caused by regulators meddling. If anything, they have been bailed out by the government. They have escaped a Passenger Bill of Rights long past when one was due. They scraped billions of debt off their balance sheets including pension liabilities all through bankruptcy and goverment generosity.
Airlines gave up service so they could 'compete' with no frills airlines. Now they have less frills airlines because all of the money they have left after no frills ends up in Persia on Jet A. Consolidation will not lead to better route maps, better service or anything beneficial to the consumer. They will benefit the shareholders. That is a solid basis to oppose consolidation. If it harms the consumer that is justifiable cause for the government to put its foot down. UA has Global Services because they figured out that if they cater to people who buy expensive tickets through improved service they make more money....nobel idea that seems to be working in spite of my misgivings about the program. The airlines can be successful without consolidation. They just need solid management, and a solid business plan. Right now it is an industry all tangled up with each other in a fast paced race to the bottom. Fuel prices go up, ticket prices go up...I can live with that. That is economic reality. Airlines consolidate, supply decreases, demand is increasing, prices go up and consumers have fewer options....that is not something we should live with. If airlines go out of business, so what. It seems to me that is a good time for market forced consolidation as they can pick up a bargain like American did with TWA.
The airlines have not been exempt from market forces. They have just not responded to market forces and been able to maintain fare increases (competition) and they have been extremely slow to respond to changing market conditions (poor management and union problems) and they have been unable to develop original plans about how to cultivate profitable airlines (poor management). None of these things support an argument for consolidation.