From The Mailbag!
Question:
Dear Sirs:
I get the feeling that FlyersRights doesn't understand why we have the huge lack of customer service in the airline industry today. You are correct that it is because of lack of competition, but the reason for the lack of competition isn't because they are merging, that is just a symptom of the root problem.
At it's core, the problem is government regulation. Every regulation has a cost, and over the decades as regulation has increased, costs have increased with them. Larger companies are able to spread those costs out over their entire operation and pass them on (they all get passed on one way or another) to the consumer in smaller chunks, while the smaller companies aren't able to do that as well. In manufacturing this has forced a lot of businesses to go overseas in an effort to do anything possible to lower costs. In the airlines industry this has forced lower service and stupid charges and fees.
Note, this isn't just about airline-specific regulation, all regulations affect the products, services and labor that the airlines have to pay for, so their costs increase as all government regulations increase. I hope Flyers Rights will start to understand the economics that have caused us to get to this point, and help to work to decrease government regulation. Of course, taxes on the economy function like regulations, increasing costs everywhere.
The more regulations and taxes that we have, the less small companies will be started or able to survive to give us good customer service.
Answer:
Dear L.R.,
I don't know any basis for your contention that mergers are not reducing airline competition, but government regulation is.
Certainly the antitrust authorities in Washington and several Republican leaning states disagree. There will be an interesting trial next month on the US Airways-American Airlines merger that should give both sides a chance to marshal their evidence and for the court to issue a decision with findings. Our comments in opposition to that merger were based on both anecdotal evidence and on studies by the American Antitrust Foundation which has leading experts as well as the Business Travel Coalition which represents large corporations with big air travel budgets.
See here.
You paint regulation as bad for business, especially small businesses and by implication the economy and consumer prices, with a very broad brush. Adam Smith, the father of free market capitalism, as the alternative to government sanctioned monopolies, famously observed that "People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices."
There is also the American phrase "railroaded" (being forced to do something unfairly and especially quickly with undue pressure) which grew out of abuses and the lack of regulation of railroads in the late 1800s.
FlyersRights.org support of reasonable regulation is to prevent passengers from being "airlined".
Internal airline documents are quite clear that higher ticket prices and the ability to crush competition are the principal benefits of mergers.
Many small businesses need low cost, convenient air travel much more than large ones who can afford private jets and first class tickets. And while it is generally true that large businesses can better afford regulation expenses, many government regulations of airlines are actually protective of smaller airlines, communities, businesses and consumers.
As to specific airline regulations, I wonder which ones you would abolish: The Three Hour Rule? Truth in Scheduling? Safety and Security regulation? Lost Baggage or Bumping compensation?
Sincerely,
Paul Hudson
President, FlyersRights
Q.
First the Airlines....now FlyersRights.
Didn't you find it ironic that in the same newsletter that points out how ludicrous it is that the airlines are up charging us for every bag, every up grade, every everything that FlyersRights now charges (donations - whatever you want to call it's an up charge) for "premium" access to the very thing that Flyer's Rights was created for, to assist "the every man" get a fair shake from the ever increasing monster fees and abuse from airlines.
SHAME ON YOU!
B.G.
A.
We would like to provide all services for free to every passenger but resources will not permit it. The phone company does not donate our hotlines. Our volunteers selflessly donate both their time and money for the satisfaction of helping all passengers.
Government, foundations, business corporations, and airlines of course also donate nothing. And unfortunately there are thousands of frequent flyer, free riders who have been helped by FlyersRights.org, including many helped directly to recover monetarily, who donate little or nothing. I trust you are not one of those. If so, shame on you.
As for airline fees for "extra services", we favor full disclosure, and prohibition of fees that undermine basic health and safety, amount to deceptive advertising, or are clearly exorbitant.
Sincerely,
Paul Hudson
President, FlyersRights
Q.
I have to come to the defense of airlines. To begin with, airlines are caught up in a pricing spiral.
What most passengers say they wanted is lower airfares. No business can survive if not profitable. This is very basic economics which passengers begrudgingly do not wish to concede to airlines.
Passengers are seeking the cheapest seat available.
If you think profits by the airlines is not necessary for their survival then you need to do a quick study of what happens when airlines are no longer profitable... PanAm, TWA, Eastern just to name a few that collapsed when they were no longer profitable. None of these three "died" due to mismanagement but are no longer around because they could not pay their mounting bills.
To complain about the cost of airfare and what you purchase with that discounted fare is not reasonable.
I challenge anyone to prove that flying to your next destination is not a good value given the time saved and distance traveled. As far as your comfort on that flight, well, you get what you pay for. Just an old pilots thoughts...
CJK
P.S. Don't even get me started on the evils of the TSA...
A.
Airlines have reduced their labor related costs which is their number one cost by lowering compensation and benefits, outsourcing and automation, except perhaps for executive compensation. Fuel is the second biggest cost and that has also been declining and is likely to continue to do so. Load factors are at record levels. Interest rates for solvent airlines are at record lows.
Airfares are up, and so are profits. So I challenge the contention of any price spiral. Insolvency of most airlines is related to legacy labor costs and inefficiencies, poor management cultures, safety issues, lack of domestic routes, competition with foreign subsidized carriers, OPEC fuel price increases, and lack of access to foreign capital due to US law prohibiting foreign ownership or control of US airlines.
It is reasonable for consumers to seek lower prices and higher quality services and for airlines to seek higher profits. FlyersRights.org simply believes there need to be limits. Otherwise, deceptive and unfair consumer practices that are highly profitable will drive out good ones, especially without robust competition. And airlines that want to provide superior service will be at a competitive disadvantage. As Greshman's Law states succinctly,
"Bad money drives out good."
The fact that airlines, railroads, and many other businesses like engineering firms, farming, or travel and tourism businesses usually have profit problems is not the whole story. Such industries provide essential services, millions of good jobs and are a vital part of the modern economy.
Fees for everything is the new airline mantra; witness Spirit Airlines' 74 listed fees and American Airlines' three tiers of checked baggage fees buried in its website. If you are Ok with those, how would you feel about a fee for talking to a live person, a fee for water, a fee for cabin air and ventilation, a fee for passengers over a certain weight, a fee for toilet use, a surcharge for children, a fee for a seat instead of standing room? Most or all of these are already on the drawing boards at some airlines. They could well become reality much sooner than you think.
Without FlyersRights.org and push back by the DOT and FAA and Congress, you will not necessarily get whatever you think you paid for, but rather whatever service an airline provides at its commercial convenience or even whim.
Sincerely,
Paul Hudson
President, FlyersRights
