Indeed. From day one of the announcement of partnership with UA, it was somewhat evident that CO intended to go much deeper in cooperation with United than has been the case with its previous partnerships.

And it's not a bad thing insofar as the company's management wisely realized that the US aviation market no longer has a sustainable niche for "mid-sized" standalone legacy carriers. Over the past few years, NW, CO, and US have all sought to become pieces of a larger network precisely because a continuation of the status quo was no longer a palatable option.

Re-regulation ... are you kidding me?

I believe good journalism is often in the eyes of the beholder. If the journalist shares your views its great journalism. If not, its trash.

Sorry to hear that. Your viewpoint then means that you consider any and all works that advocate a viewpoint anathema to yours to be trash? The fact that it might be well-written and well-researched doesn't matter? I guess you've never read acclaimed work that deals with the opposing side of something you believe so as to have a better idea of how to defeat the arguments therein?

He's not kidding in the least. The economics of the domestic airline service are decaying to a point where some modest regulation going forward may be in order to ensure its continued viability.

And IMHO, there's nothing particularly shameful about this -- numerous countries, of all sorts of economic backgrounds, have regulated domestic air services

We will have to agree to disagree. There is almost no risk that the US air travel market will not continue to be (over)served. Barring such a risk, there is no reason for the government to get involved. That CO is trying to serve markets that it is poorly equipped to serve is not cause for government intervention.

I think you would come across as much more correct if the variable of business/premium cabin travel did not affect the domestic US market as much as it does. It's the disproportionate loss in revenue caused by business travel and those who purchase up front that is causing a good chunk of all US airlines' problems. Getting stuck on fuel hedges is a great thing to blame too.

No, I said in the eyes of THE beholder, not THIS beholder. Was referring to how human nature often works.

+1

Given the mood the public is in over AIG, I don't think Kellner really would like having government scrutiny if he thought deeply about it, we aren't going back to the days of when industry had captured the CAB and engaged in government sponsored price fixing.

+1

What form should this regulation take? What should be regulated?

We don't need more regulation - the industry is a victim of bad economic times which will improve. Stronger carriers like CO and DL should probably hope more for weaker carriers like UA and US to fail.

I'm still have a strong feeling that the "close" relationship we're developing with UA is nothing more than strategic positioning to snap up much needed routes and assets when UA finally bites the dust.

Well said.

Totally agree. CO is getting a better alliance for themselves in joining Star, but they also managed to secure the first spot in line for picking UA's corpse clean. The route authorities in Asia and the desperately needed widebodies would be at the top of my shopping list, but JMO. Bringing back the CO presence at DEN and having ORD would be nice too.

The fundamental economic problem in the American *domestic* aviation market is that on a collective basis since Q1 2001 (yes, this is a problem with PRE-9/11 origins), airlines have generally lost most or all pricing power, particularly in the larger air travel markets. Put another way, airlines in the domestic market find it nearly impossible to raise fares without risking sizeable decreases in demand, especially on routes with significant competition.

This is not a problem any single airline management team can fix. Indeed, the varied efforts of the different legacy and LCC management teams over the past decade -- from Continental's and Delta's efforts to differentiate their brands with full(er)-service offerings, to the aggresive unbundling efforts of American, Northwest, United, and US Airways, and the shifting of market targeting by Southwest, AirTran, and jetblue -- have not lead to varying degress of success but rather varying degrees of failure in the domestic aviation market (some simply bleed less money than others, and some have superior financial band-aids in the form of better fuel hedges).

In terms of how regulation might work, one option is to permit an expansion of antitrust immunity into the domestic aviation market, with strong governmental oversight on pricing. If allowed, and sought by the airlines, this would allow CO and UA to cooperate on the pricing and number of frequencies offered in busy markets like EWR-IAD/ORD/SFO/DEN, with the idea that the carriers would rationalize out excess capacity and be in a position to stimulate pricing power again.

Southwest Airlines has been barely breaking even or losing money for quite some time now, if you subtract the financial upside of their fuel hedging gambles. Again, this is not a problem unique to legacy airlines, legacy managers, or even the US domestic market (other countries have encountered similar systemic difficulties, and have moved to "re-regulate", with success).