The Baffling Airline Business: Both Sides to Blame?

Wow..... at last someone tells it like it is..... This whole industry has gone down the tubes since deregulation. When the industry was regulated every thing was just fine, you worked with the formula cost+profit=price. Nice, easy and every one made a buck. In todays deregulated environment the formula seems to be price-cost=profit(or in most cases loss). I think we should bring a bit of regulation back to the industry. Let the airlines charge what they want, with one rule, they have to prove that the fare chareged, must at least cover the full cost of the flight inclusive of inflight service and free baggage allowance. If they want to charge a break even fare, thats fine. But if they want to make a buck for the shareholders (which is the reason they are in business) then the have to factor it in which brings us back to price=cost+profit. The travelling public will just have to get used to the idea that airlines cannot sell a 750 mile flight for $25.00 plus taxes. Lets get real.....

I have been saying these same things since the beginning of July. I'm glad to see somebody agrees with me. I am the product of 3 generations of an airline family. I lived through deregulation and saw the effect it had for years after. I saw big airlines crumble and lives ruined, while new airlines thrive and costs can down to spoil the traveling public. How can brining costs down have such a negative effect on both sides of a major industry? You said it all just as I have. Travel was a luxury and now is like a bus to everyone. It's time to pay a reasonable price for a service unaccustomed to charging a profitable price. It's like everyone is afraid to admit it, but it's pay to sustain the airlines or lose them. I could go on about this for hours. The airlines are dying and everyone is afraid to take the risk required to save it.

It's not just the aircraft. Airports and air traffic control systems have been under strain for years. It will be interesting to see how the (supposedly) super fuel-efficient Boeing 787 Dreamliner and the Airbus A380 superjumbo change things, if at all. Decades ago, there was a debate of sorts over which was the wave of the future (i.e., our present): supersonic air transport, or larger, slower aircraft that carry more passengers per flight? Well, we know the answer now. The supersonic Concorde has headed off to the museums, and its ideological nemesis, the Boeing 747 (and its descendents) are still very much with us. The downside is that financial imperatives make it necessary to cram as many people as possible onto each flight to make it profitable. Heaven help the poor soul who has to get home on a family emergency with only a standby ticket in his or her hand. As far as airline customer service is concerned, my experience has been mixed. I've been on one flight during which the flight attendants visibly became upset with the passengers, and I've been on flights were the service was excellent. I've been on a flight that was delayed on the ground so long that I could literally have driven to my destination more quickly, and my most recent flight from Tokyo to the US arrived at its destination 45 minutes early. It's pretty much the luck of the draw. I've never considered airline travel a right. When I was growing up as a military dependent, we were allowed to fly on military transport aircraft only if open spaces were available after all priority cargo and passengers were aboard. If we were lucky enough to get seats, those seats would either be on pallets bolted to the deck or paratrooper-style bench seats. Unlike a commercial aircraft, military transports are designed to carry mostly cargo, and the comfort of any human passengers is an afterthought. Before takeoff, the loadmaster (the Air Force airman in charge of everything in the cargo hold) comes through and passes out disposable earplugs to all passengers. Those scenes in the movies during which the protagonists have a conversation aboard military transport aircraft are totally bogus - it was impossible to hear or to be heard unless you were almost shouting. After that, I try to keep things in perspective. Regardless of the ticket price, I find that if you plan ahead and pack light, you will probably have better luck, though there are no guarantees.

Unlike any other purchase, the American travel consumer has demanded the cheapest possible air travel money can buy. The system in place is exactly what they want. Safety, efficient, trouble free travel is NOT a consideration. They simply do not care. The only thing that matters is price. Just ask the passengers off Comair 5191, wait, you can't ask them. They are dead. Those who do care no longer travel or fly on private aircraft. The airline industry is going to collapse and the fall will make the S & L bust, the dot com bust, the housing bubble bust, the mortgage meltdown, and the soon oil bubble bust look like insignificant radar blips.

thank you for the honest truth. Airlines are businesses and therefore need to make money. Yes Prices will have to increase to become/remain profitable. I hear it all the time from my fellow co-workers how they don't make enough money w/ all the pay cuts in the last 10 years, but my honest opinion is that for what I do I still make a decent living. So if airlines need to charge for certain ameneties well so be it.

THANK YOU , thank you , thank you. Someone who FINALLY gets it!!!

You make many good points on our expectations of airline travel. However, i think that one of the big problems that i have seen is with customer service. Everyone that i know who has flown has had at least one bad experience with the quality of service. Everyone hates to fly. This is not always the fault of the airline, as most of the problems seem to be the fault of the airports themselves. However, people don't care. They hate to fly. Although people are willing to pay more for certain items, such as a car or a watch, they do so expecting the product or sevice to be of higher quality. With air travel, we pay a lot of money for a terrible experience. Not always the airlines fault, but most people still consider flying to be a hassle. Great article, and thanks!

Hi Brian! This is a well-written and really informative article. Personally, in order fo the airlines to turn it around financially, I think they should just raise their fares and stop the practice of "nickle and diming" their customers to death and then focus on better customer service. It's no wonder passengers are fed up. Every time you turn around, it's costing you $5 for this and $5 for that!!! The airlines have done a lousy job in the past in hedging their fuel cost (except Southwest) and it's time for them to accept responsibilty and stop giving the passenger the "green weenie."

Comment by Blue Forest.... I’ve been on one flight during which the flight attendants visibly became upset with the passengers, and I’ve been on flights were the service was excellent. >> So, Flight attendants are supposed to just take passenger abuse, and keep smiling? and this for 30% less pay than 5 years ago? C'mon. if someone gave you a hard time over something you had no control over ( like the food,or lack thereof,on board)you would just say "thank you,can you yell at me some more?" ..yeah .... Comment by Jonathan With air travel, we pay a lot of money for a terrible experience. >>Uh, did you read the article? You may THINK you are paying a lot of money, but honestly, you're not paying enough. Caveat emptor, you get what you pay for. Sadly, if you watch the airline industry, you would notice you are paying for a bunch of Executives and NOT for whatever the airline could offer. Ex.: AAL has lavished over $400 Million in profits and bonuses (over the past 3 years) on their executives( CEO in particular), instead of re-investing in the airline. Does that tell you anything about the priorities of the leadership in the industry?

To airline worker: Nowhere in my post did I state that the flight attendants either were subjected to passenger abuse, or were obligated to do so. FWIW, I have a relative who works as a crew member for a major domestic US airline, so no-one is more sympathetic to what flight crews do than I am. Such defensiveness on your part was entirely uncalled for.

About the issue of Customer Service, or lack of it in todays airline industry, the answer goes directly back to price. Customer Service costs. In order to provide a sustainable high level of customer service a company requires well trained and highly motivated personnel. The problem today is, that with all the cost cutting going on, training budjets are slashed, at least in non mandated training areas and saleries are reduced in order to provide passengers seats on aircraft at prices that are just not sustainable. Motivation goes out the window and takes Customer Service with it. You can't keep asking people to do more with less indefinately and expect that they will. The good years (for the passenger) are gone, oil prices are through the roof, and I can remember how the airlines screamed when crude topped the $50.00 a barrel mark. Wake up out there, RASM (Revenue per available seat mile) has to exceed CASM (Cost per available seat mile. If it does'nt you're dead, or at least dying.

I agree with most of the argument here and yes they can raise the fare to keep up with the oil since they are running a business to make a profit. But they should also be responsible with the profit they make. They should try & re-invest the money they make to improve the service at the same time maintaining a reasonable profit margins. When we talk about living within our means it means you got to spend within what you earn, same should also apply for the business. So we cannot entirely blame it on the Oil price & Inflation. They could have hedged the oil price like southwest or they could have saved some money they earned after coming out of bankruptcy as a cushion for these circumstances. Many airlines after they emerged from Bankruptcy rewarded their CEO's with tons of stock options & bonus worth millions of dollars while pay cuts for employees(US Air - $6Million,United - $40Million,Northwest - $26Million).Of-course these are stocks that were to vest over a period of time. But I am not saying, don't reward your CEO, but be reasonable. When stock holders & Board reward the management when they are doing good, they should also pull their leash when things go wrong rather than reward them again. Continental CEO's are taking pay cuts now,its not that they are starving to death or working for low wages. But Continental is serving free sandwiches on its flight!Maybe there is still room to run your business efficiently and make some profits.

It sounds like this article is making excuses for poor service and trying to justify it. I have no problem with cutting the amenities or charging extra for them. Like any other industry, they have to have a business model that will allow them to make a profit, but get the basics right. I am not willing to fly if it means using three connections and long delays in-between. Although not always possible, I would rather drive and suffer the inconvenience/time, than accept poor service. What other industry considers bad service as an acceptable model, and expect their customers to accept it?

Thank you for an excellent article, looking at the other side, it seems that it has now become a game to impress your friends, amazing I only paid xxx for my flight. There are so many high cost items which have been inherited from the before deregulation days, such as pilot salaries,an overhang from the heroes of the battle of Britain ( captains only travel in first class ), ATC charges, landing fees and associated airport charges. In many cases the only persons you meet and represent the airlines are the check in people and the cabin crew and if you have a good flight or not depends on them. Unfortunately they are taken for granted and are really cheap labor and a requirement from the relevant Civil Aviation Authorities. Southwest have got this right, the cabin crew are important, they sell your next ticket, not the pilot and if the next ticket is not sold, you soon will not need the pilot. Perhaps the airlines should incorporate a Little lateral thinking, things have changed since the days of B.O.A.C, Panam, Transworld

[...] Fare Compare.com’s CEO Rick Seaney fisks FBN’s Brian Sullivan over the latter’s article on the airline business and who’s to blame, and throws an unexptected small elbow at Sullivan [...]

I am one of the many people who simply fly only rarely, not based on hatred of airlines, but due to not wishing to pay the prices required for long distance travel. If I have to fly there, I just don't go, it's as simple as that. My wife and I have gone to weddings and flown, but only due to the low price fares. If fares go up, I will have no animosity towards airlines, I simply won't go on trips via air. One real problem is that in say, Atlanta, you have to go through the same TSA line for Delta as for Airtran, so Delta can only marginally improve your experience at the airport (my main reason for disliking air travel) without having their improvements benefit Airtran flyers. BTW, I would gladly pay a few dollars more for a flight to get free refreshements; of course, that could be due to business flight where I pay for refreshments but not the fare. :) I think the basic truth is that profitable air travel levels fall far below the present levels, so until the supply is reduced to match profitable demand, airlines will have to fly at a loss. Maybe larger seats in coach would work, as I frankly look very hard for flights with low occupancy in order to have more space. If having empty seats around people becomes of significant import, then larger seats would make a difference. I would pay more for an airline that had larger seats, though it would take a bit to get me to think of it as right to pay more for a larger seat on the same flight as people paying less for smaller seats. Actually, I would pay more (but NOT first class more!) for a slightly larger seat. Unfortunately, airlines do not seem to grasp this so all seats are sized for 100 lb 5 foot tall passengers. Oh well, my car has comfortable seats and I like to drive!

I flew about 2 million miles in my life, on business and privately and I believe I have seen it all (or close to it). On my latest vacation flight I was supposed to connect in Chicago. On my route to Chicago there were 3 flights in the day. In order to ensure that I do not miss the connection, I asked to be put on the earlier flight: no deal because "a connection exceeding 4 hours is considered a 'lay-over' and cannot be booked". Arriving to the airport, there was a wheather delay. And the check-in clerk said that had I come to the earlier flight she would have let me on... Numerous emails to the airline, including letters to the top management could not accomplish what a desk clerk was willing to do. So it is not the people serving the public who are at fault but the bosses getting the millions of dollars in bonuses. Why is it so? Because the airlines have gotten too big to be managed efficiently. Just like governments, rules overrule common sense. The solution is to break-up the behemoths of the industry and let the well managed smaller airlines get rich and let the poorly managed ones go bankrupt. As simple as that. If you do not graso the concept I recommend reading Ronald Coase who lready in the 30's elaborated the theory demonstrating that a company can get too big for its own good, its customers' good and society's good. The extreme example: centrally planned economies. You do not need communists to run an inefficient economy.