Ok, this has been on my mind for about the last 10 years. I have a beef with the airline industry, and I think they should be regulated for their own good. Now, let's talk about why: First off, the pricing pisses me off. It is so completely random and arbitrary. When you walk into a Burger King, you know exactly much they are going to charge for a Whopper. When you get your mortgage or pay rent... you know how much it is going to cost. Imagine if you went to Starbucks, like you have every morning for the last year, and your Mocha frappalatta thingy is $350. You'd freak. You would tell them they can't run a business like that. Then you would tell them to shove that $350 coffee up their ass. Then, you wouldn't do business with Starbucks again.
That is how the airlines operate though. I remember suggesting this to my brother many years ago and he said the free market works and capitalism is good and stop being such a Democrat. Guess what? They are all bankrupt, I think every single large American carrier is bankrupt.
I want the airlines to work. I want them to make a profit and be happy. I also want a fair idea of what it would cost me to fly to Phoenix at any given time. Here then is my solution. The airlines should be made to charge a certain amount per mile, like a taxi. I don't even care what their profit is, but obviously build in a good one. That way, I could figure out on a calculator what my ticket would cost but knowing how many miles away a city is. Also, the airlines could much better manage and predict their revenue. See, as a tax payer, I am bailing out these stupid companies... and that cheeses me off.
Article comments
1 - Karthik
only problem is the volatility of fuel (and price variability at different airports at the same time), differences in landing fees at various airports, how the winds usually are on a route (more headwind --> more fuel --> more $), how popular the route is...
a taxi usually operates inside a single area, and traffic patterns are usually consistant...there's always an option of shopping around for gas, etc. with an aircraft, it's difficult to do so (although some flights make stops en route to fill up on cheaper fuel) for subsequent legs...
2 - Mike Kole
Lono: Do you remember the days before the Carter Administration (not Reagan as is commonly misperceived) deregulated the airline industry? Only wealthy or business people regularly flew.
The airlines that are bankrupt aren't so because of deregulation. They are bankrupt because after initially evolving at the time of deregulation, they became stagnant in their business models. While the major airlines are wallowing, there are plenty of smaller airlines like Southwest who are thriving. Southwest didn't need or want a bailout after the terrorist attacks because their model was working, providing cheap flights and filling their planes. Nice book choice, by the way!
Interestingly, it is precisely the major airlines, who stubbornly insist on trying to use consisitent routes, who are suffering. They insist on these routes whether or not the traffic is there, which is a truly stupid approach.
You and I do have a huge agreement on one thing, though: It cheeses me off too to be bailing out the airlines with tax dollars. Companies too stubborn to evolve should suffer rather than be rewarded for their lousy judgment.
3 - simon hb
Every year, in the UK's economics A-Level, there is usually a question set along the lines of "what would be the consequences of railways charging a fixed rate per mile?"
The answer, of course, is an explanation of why this model of charging wouldn't work - because, basically, demand for rail travel (and, of course, air travel) isn't uniform - more people want to fly at thanksgiving and christmas, fewer in the depths of february. More people want to fly between New York and Washington than between Dakota and Michigan.
To adopt your taxi analogy: taxis don't charge a fixed rate per mile everywhere in the US: the rate varies according to local conditions.
4 - Mike Kole
An excellent example of the results of price fixing can be found in passenger railroad service int he US, from the late 1950s until 1971, or even today's Amtrak.
The Northeast Corridor has exceptionally high demand for rail service, and has always been profitable for the companies providing this service in places such as Boston, New York, and Washington DC. This is Amtrak's only profitable corridor today. It was profitable even for beleagured Penn Central, which was the largest corporate bust in history when it bankrupted in 1975.
As passenger service waned with the emergence of passenger automobile traffic and the airlines, many railroads quickly determined that passenger rail service was doomed, and they began getting out of the business.
Political forces stopped the process in the late 1950s, arguing that passenger service was a vital and necessary service to the cities it served, and it was forbidden for the railroads to discontinue the service. In exchange for the inconvenience and in compensation, the ICC allowed the railroads to increase the fares beyond market pricing.
The result was to chase people from the trains *faster* than the cars and planes were taking them off. Railroads were running ghost trains because they had to.
The stories are comical. Penn Central ran two passenger trains from Pittsburgh to St. Louis in the early 70s, because they were held to it by the ICC. Nobody was riding these trains, so they ran them four minutes apart, and with only one car. That way, the track was cleared for all of the passenger traffic in one window of time in the day, and dispatch could get back to the real business- freight- with only one interruption instead of two.
It was stupid, destructive policy to keep running passenger trains. American railroading was almost destroyed by this and other regulatory policies (the insistence on using the caboose; the insistence upon paying a fireman to be on the train until the late 1970s, even though firemen were made unnecessary when steam trains were replaced by diesels in the late 1950s, etc....)
Southwest currently picks routes that they see an opportunity to make money on. The major airlines serve many cities more out of some feeling of obligation or prestige than anything else. We're United, and darn it, we *should* have 200 flights daily out of O'Hare! If the demand isn't there, then this dogged approach means United flies empty planes. If the demand is absent, and they doggedly refuse to lower fares, then the planes are extremely empty.
If Southwest isn't getting traffic on a route, they get off the route.
And again, it cheeses me off that these stubborn major airlines refuse to learn and evolve, and then had the nerve to use a national tragedy to go seeking an enormous handout. They should be suffering as a result of their horrible judgment.
5 - Gary
No one has brought up the governments intervention in this industry. The FAA while adding some good things adds a lot to cost. Any time a screw cost $25 somethings wrong and someone has to pay for it....the passenger. I am all for safety but the government doesn't necessarily have a good record on efficiency.