Let the airlines die
I need to rant a bit about one a topic away from the headlines. The potential bankruptcy of Northwest Airlines. For years now I have seen some of the major airlines descend further into unprofitability. Despite cuts in manpower and amenities, profit still seems just beyond reach. Their management cites labor woes and fuel costs as major contributors and justifications for their lousy service and panhandling behavior towards the taxpayers of various cities, states and the federal government.
If Northwest comes to the point of bankruptcy, I would not be sad to see it happen. I simply cannot understand how the issue of airlines is so different to any other business in America. In order to make profit, one must spend less than one earns. At some point, the airlines need to start passing off the increasing costs to their consumers, or find ways to cut overhead. The current strike is a result of just such an attempt. Maybe they should have raised ticket prices instead.
I do not believe that the major airlines and indispensable. If Northwest goes under, my hometown of Minneapolis/St. Paul will effectively be cut off from much of the country and the world by virtue of an asinine concession package that has locked us into a Northwest monopoly since deregulation. Still, I refuse to believe that those empty gates at the Humphrey and Lindberg terminals would stay empty for long. There are almost 3 million people in the Minneapolis/St. Paul area that on varying occasions will need to travel. All it would take is an airline with better management and a better business plan to come in and make those routes profitable. If Northwest cannot survive in this business climate, then they should go extinct and make room for a ?fitter? airline to rise up and fill their niche.
If Northwest comes to the point of bankruptcy, I would not be sad to see it happen. I simply cannot understand how the issue of airlines is so different to any other business in America. In order to make profit, one must spend less than one earns. At some point, the airlines need to start passing off the increasing costs to their consumers, or find ways to cut overhead. The current strike is a result of just such an attempt. Maybe they should have raised ticket prices instead.
I do not believe that the major airlines and indispensable. If Northwest goes under, my hometown of Minneapolis/St. Paul will effectively be cut off from much of the country and the world by virtue of an asinine concession package that has locked us into a Northwest monopoly since deregulation. Still, I refuse to believe that those empty gates at the Humphrey and Lindberg terminals would stay empty for long. There are almost 3 million people in the Minneapolis/St. Paul area that on varying occasions will need to travel. All it would take is an airline with better management and a better business plan to come in and make those routes profitable. If Northwest cannot survive in this business climate, then they should go extinct and make room for a ?fitter? airline to rise up and fill their niche.
Comments
When I go to Berlin from Copenhagen I pay $50 for a return ticket with easyjet INCLUDING airport taxes that takes over half of the costs. I have used it for about ten return trips and never been late. They fly new Airbus 219 airplanes and allow as much cabin package as you can carry. The downside? They only have one return flight on that route each day and they don´t serve coffee.
WIth SAS I would pay AT LEAST three times, more likely four times as much. They use OLD McD-Douglass planes. They DO have coffee and three return flights every day.
Easyjet have a robust profit while SAS is burning money. Low cost companies have revolutionized the airline business here in Europe the last three years and they are making profit, at least the largest, Easyjet.
Someone explain this to me.
?166
We have since had airline deregulation and now these airlines have to actually compete, which as many have noted leads to lower prices. However they are still required to pay for the former union concessions in the deregulated environment. Much of this is also true of American car makers who are still locked to pension and union agreements they made when they had massive marketshare and no true worldwide competitors.
Nick
Originally posted by trumptman
The reason most airlines are not profitable in the United States is because the government used to regulate which routes you were allowed to fly your planes along and this gave certain airlines certain monopolies. When unions would come along with work, pension and pay demands the airlines would simply raise the prices on certain routes because the customer didn't have any sort of choice. If you didn't pay you simply didn't fly to that location.
We have since had airline deregulation and now these airlines have to actually compete, which as many have noted leads to lower prices. However they are still required to pay for the former union concessions in the deregulated environment. Much of this is also true of American car makers who are still locked to pension and union agreements they made when they had massive marketshare and no true worldwide competitors.
Nick
Certainly you are correct. My issue however is this: if the airline cannot do much about the overhead, why not raise ticket prices? Is it possible that the major airlines are collapsing under their own weight? If so, why not let them go under? In the short run there would be pilots, mechanics, flight attendants and more who would be unemployed. However, those routes served by the defunct airline would be sitting there unserved. Some other airline would step in and fill their space thusly creating new jobs.
Originally posted by Kishan
Certainly you are correct. My issue however is this: if the airline cannot do much about the overhead, why not raise ticket prices? Is it possible that the major airlines are collapsing under their own weight? If so, why not let them go under? In the short run there would be pilots, mechanics, flight attendants and more who would be unemployed. However, those routes served by the defunct airline would be sitting there unserved. Some other airline would step in and fill their space thusly creating new jobs.
You are right on ... if the route has costomers, SOMEONE will pick up the flying. Airlines sell transportation... as long as they are selling tickets for less than it costs to provide that transportation, they'll lose money... How hard is that to figure out ???
As for de-regulation ... total de-regulation would have been great, but it didnt happen that way. The airline business is FAR from de-regulated.
reg
Originally posted by reg
The smaller airlines take the more profitable routes. They don't fly as often and outsource their maintenance. Their pilots don't make as much (many are not union) and most tend to be non-frills with fewer flight attendance. Lastly they don't have as big a middle management and have few gates to rent. So all in all it would take a major realignmnet to make some of them profitable OR they could raise their ticket prices and have a chance of no one riding them and going our of business.
reg
I don't know that people would stop flying because the ticket prices go up. I haven't flown a flight in the past ten years that wasn't packed to capacity. And I don't believe that this is because the tickets are cheap. People have no real alternative to flying. There is no high speed rail in the country (outside of the northeast) and driving is too impractical for the greater distances. As another poster pointed out, airlines sell transportation. If they are selling their product at a price that doesn't cover their cost, they can only raise ticket prices, or cut costs. If they are unwilling to raise prices and unable to cut costs, they should die and allow market forces to fill the void.
Originally posted by Kishan
I don't know that people would stop flying because the ticket prices go up. I haven't flown a flight in the past ten years that wasn't packed to capacity. And I don't believe that this is because the tickets are cheap. People have no real alternative to flying. There is no high speed rail in the country (outside of the northeast) and driving is too impractical for the greater distances. As another poster pointed out, airlines sell transportation. If they are selling their product at a price that doesn't cover their cost, they can only raise ticket prices, or cut costs. If they are unwilling to raise prices and unable to cut costs, they should die and allow market forces to fill the void.
As long as they get periodic bailouts from the government, why would they bother doing either?
As long as we keep giving them money, they will keep on taking it.
Originally posted by Kishan
Certainly you are correct. My issue however is this: if the airline cannot do much about the overhead, why not raise ticket prices?
Because as others have noted in this thread, we aren't talking about a small price difference. U.S. automakers for example spend more on pension and benefit obligations than they do on the actual steel in their vehicles. Also when you have other competitors who DO NOT have these obligations, what are you supposed to do? Raise prices and watch the customers run away?
I'm not especially fond of the whole "gotcha" mentality of ticket pricing with airlines and I think they could make some gains in that area but obviously cruise ships, hotels and other industries have that type of pricing structure as well.
Is it possible that the major airlines are collapsing under their own weight?
The "weight" you mention is mostly benefit and especially pension obligations. As you yourself have noted, most of the present cost cutting that can be done has been accomplished. However while you can cut the salary of your current pilot you cannot cut the promised benefit from the pilot you had that retired five years ago.
If so, why not let them go under?
Would you feel any better when they dump these pensions on the federal Pension Benefit Guaranty Corp and ask the tax payers to take them on?
This isn't just a problem with the airlines. It is a problem with all pension especially with boomer related retirement. As a generation they simply did not invest enough and overpromised.
In the short run there would be pilots, mechanics, flight attendants and more who would be unemployed.
So basically unemploy the current generation who they are already cutting to fund the overpromised pension guarantees of the prior generation. Something tells me that won't work. Until the boomer generation faces the music, nothing will get fixed. Look at Social Security which isn't even tied to an airline. It has 8 trillion of future obligations which it cannot meet while the entire federal deficit is already 6 trillion dollars. When you underinvest by 14 trillion dollars over a generation, nothing you can do with the current generation or in the present can fix that. Someone is going to realize that there is no silver bullet but that might cause a lot of boomers to start eating real bullets when they realize what their "golden" years might look like.
However, those routes served by the defunct airline would be sitting there unserved. Some other airline would step in and fill their space thusly creating new jobs.
This sort of crash is likely what will occur. My pet scenario is hyperinflation.
Nick
Originally posted by Kishan
Certainly you are correct. My issue however is this: if the airline cannot do much about the overhead, why not raise ticket prices? Is it possible that the major airlines are collapsing under their own weight? If so, why not let them go under? In the short run there would be pilots, mechanics, flight attendants and more who would be unemployed. However, those routes served by the defunct airline would be sitting there unserved. Some other airline would step in and fill their space thusly creating new jobs.
Raise ticket prices? They are dying because their ticket prices are too high already and trying to compete makes them cut costs and they lose more money
Jetblue costs me 130 dollars each way to fly cross country. American, Delta, United, etc....costs 300+ each way and usually have connecting flights. jetblue has frequent service and all direct flights
Hmm. What is the fastest train between LA and San Francisco & New York and Washington?
LA to SF....cheapest 59 dollars and it takes 10 hours via amtrak. jetblue is often 39 dollars and takes 50 minutes
NY to Washington is the accela and that's very expensive
The "weight" you mention is mostly benefit and especially pension obligations. As you yourself have noted, most of the present cost cutting that can be done has been accomplished. However while you can cut the salary of your current pilot you cannot cut the promised benefit from the pilot you had that retired five years ago.
So should we let the airlines and automakers declare bankruptcy and stiff their retirees?
Originally posted by Anders
Hmm. What is the fastest train between LA and San Francisco & New York and Washington?
Trains? In America?! HAHAHAHAHAHA!
As an aside: didn't Amtrak just do something like triple its fares on the big commuter lines?
Originally posted by midwinter
Trains? In America?! HAHAHAHAHAHA!
It's a shame trains in america has become the joke it is considering our amazingly rich history of railway travel.
Originally posted by Anders
Hmm. What is the fastest train between LA and San Francisco & New York and Washington?
um, slow. (Amtrak are at the bottom of the pecking order, as the railroads are owned by the freight companies).
Originally posted by trick fall
So should we let the airlines and automakers declare bankruptcy and stiff their retirees?
It doesn't really matter what we "let" them do. It is what is going to happen.
Nick
Originally posted by sammi jo
um, slow. (Amtrak are at the bottom of the pecking order, as the railroads are owned by the freight companies).
We can thank Reagan for that one.
On the issue at hand.
Let the companies die, this goes for auto manufacturers and agricultural subsidies as well...
We don't need no stinkin' coorporate welfare when the entire purpose of a coorporation's existence is to be profitable. Free market arguments are perfect when talking about the free market, but nowhere else.
Originally posted by trick fall
So should we let the airlines and automakers declare bankruptcy and stiff their retirees?
I think we should take the subsidies we give to these companies and make good on their promises iff they go under when we remove the subsidies.
If they don't go under after the teet is removed then that is great.
If they do go under the government will have all that wasted money they used to subsidized these failures of corporations to make good on the pension plans.
The government would spend its money better by creating employee retraining programs than subsidizing a business type that clearly isn't self sufficient in our economy.
Originally posted by Bronxite
Raise ticket prices? They are dying because their ticket prices are too high already and trying to compete makes them cut costs and they lose more money
Jetblue costs me 130 dollars each way to fly cross country. American, Delta, United, etc....costs 300+ each way and usually have connecting flights. jetblue has frequent service and all direct flights
I'm not talking about the small carriers like jet blue. I am talking about Northwest, Delta, United, American in particular. To varying degrees, these airlines are all in trouble. I have flown all within the past three years (on domestic routes) and all have abysmal service, old aircraft and employees that act like they are doing me the favor by doing their job. Recently I have had the pleasure of flying America West, ATA, Sun Country and Southwest. Not only were these airlines cheaper to fly, but the service was much better.
Regarding raising the prices, what other option is there for them? As a taxpayer, I am sickened by the idea of bailing them out just so that they can continue their money losing ways. If that means the taxpayers have to guarantee pensions for many of their employees, so be it. It amounts to the same thing as a bailout except that we can let the badly managed airlines die and make room for newer providers that have a profitable structure.