I must say I have to agree with posts in another thread that pointed out that none of the new security measures would have prevented the attacks of earlier in the week. The pressure for strong-looking, decisive action is understandable. And, short-term at least, getting the confidence of the public back depends on projecting the right appearances.

But I sure hope we can move quickly through that phase and concentrate on quality in security rather than in quantity (i.e. the "Throw checkpoints at 'em") approach. The knee-jerk response is to add inspections, but long-term I think it's far better to have better machines and better training to improve the quality of the screenings than to emphasize quantity.

Otherwise we'll get another situation like the Gulf War where the public's tolerance for new measures slowly erodes and the costs mount up for the airlines and the economy. (This "war" isn't likely to end abruptly, either.) We ended up with more (but not necessarily better) security measures, compromised somewhat by airlines' later introduction of eTickets, alternative check-ins and other measures where the real motivation was to cut labor costs.

The disaster scenario for consumers this time is calls for new taxes in the name of security, and more airline mergers.

Airline passengers already are scandalously overtaxed with both direct taxes and so-called "user fees" (I've had tickets where 25-50% of the cost was tax!). We should insist that that existing high taxes be spent on air-traffic control improvements, airport security or other things air-travel-related, rather than just piling up unspent in trust funds. Enough tax money is already being collected, it's just not being spent.

As for the merger talk, it'll escalate if the smaller airlines like Continental get hit proportionately harder by higher labor costs than the big 3. "Merge or die," we'll hear. But the effects on fares of having less competition will be disastrous. It'll also seriously erode FF benefits, since competition is really the only thing driving those.

And then there's Southwest Airlines, the one we REALLY can't afford to lose. They've always said their main competition was driving, since they fly a lot of short hops. Well, "driving" has suddenly gotten a big competitive leg up.

Which may be the worst news of all for safety, since driving has a much higher rate of death per passenger mile than flying. The deaths just happen one-by-one and never make headlines. That would be the cruelest irony.

So I hope we can reach a new equilibrium where we get better but not necessarily more numerous security procedures, and where the cost burden is distributed fairly. Otherwise air travel and FF programs will suffer a long-lasting blow.

[This message has been edited by RustyC (edited 09-13-2001).]

RustyC,

Very good points. I was thinking while driving home yesterday about the consequences of the FAA grounding and the impact on various airlines. The new security rules will decrease aircraft utilization rates.

Already, Midway has closed up and TWA would most likely have too if AA had not acquired it.

In addition to CO, some weaker airlines like US could be put into a more serious financial bind (due to the proportion of its flights that are short hops). WN, though strong now, could see its business model destroyed by longer turnaround times if each plane is thoroughly checked before each flight.

Every airline that merges or goes bamnkrupt will decrease competition. The reasons for industry consolidation from journals like the Economist are the same ones that investment bankers use to justify mergers to senior management: market discipline. By controlling capacity with much fewer players, you control supply and hence to a large degree control prices.

If we see the Big 3 end up controlling 75% of the market, say goodbye to competitive fares and frequent flyer benefits.

Gentlemen, I see your not CO flyers... perhaps you might be interested to learn the only 2 domestic top 10 carriers making money are the 2 you speculate win go under. Both CO and WN have much LOWER labor costs than the airlines you feel will dominate. I would also point out that UA already had junk bond status debt before this tragedy. I would disagree completly with your economic predictions. UA will have to pay more to fund their debt, because of their poor financial status. The planes sitting longer will hurt all airlines... but it will hurt the financially weak the most.

[This message has been edited by cigarman (edited 09-13-2001).]

Some friends and I were having these same discussions earlier today, mainly regarding IATA's projections of multi-billion-dollar losses for the airline industry over the next few quarters.

Initially, I questioned how AMR, UAL, LUV, etc. could even open on Monday morning without a huge gap down. But then I got to thinking: those three, DAL, and one or two others can sustain a period of large losses. They are big enough and strong enough; in fact, the federal government would likely take action to ensure that they remain in business. Therefore, a large gap down could present a buying opportunity at some point in the coming days/weeks, although it's clearly a long-term investment.

The little guys are the ones that will get hosed. Midway is the beginning. What about America West, Midwest Express, Vanguard, Alaska, and some of the other regional carriers? They might not survive, and that puts the largest 3-4 airlines at even more of an advantage as competition decreases.

Cigarman, I agree--but without short turnaround times to maximize the efficiency of its fleet, Southwest could have trouble. They need lots of (read: frequent) full flights to maintain their current level of profitability. Holding aircraft on the ground for inspection/longer boarding times will definitely put a dent in that part of the business model.

The next airlines to fold are those standing on weak legs already- National and maybe Frontier. I think the latter may lean more on its "parntership" with Continental, but we will likely see 3 major alliances- OneWorld, Star and maybe Wings (more likely a scarmbling of tiertary carriers).

Watch possibly as well for airlines to renegoiate contracts with pilots and FAs until they go through this difficult time. Those who are employee-owned