01 July 2008

Prescriptions for ailing US airlines: return to regulation?

The continuing US airline crisis has brought a wide variety of developments that range from federal legislation for passenger rights to rising concerns that small businesses and air-dependent tourist destinations need help. Some airline officials are even suggesting a return to regulation.

---The Air Service Improvement Act of 2008 has been introduced in the House of Representatives.

Under its provisions, airlines would have to submit plans detailing how they would provide food, water, restroom facilities, ventilation and medical treatment for passengers onboard an aircraft that is on the ground for an extended time period without terminal access.

"This bill is intended to move passengers' rights legislation along on its own merit, since similar passenger legislation was already passed by the House in the FAA Reauthorization Act, which has become stalled in the Senate," said Kate Hanni, founder of the Coalition for Airline Passengers' Rights, Health and Safety.

---Roger Dow, president and CEO of the Travel Industry Association, portrayed the US air system as in Ã¢â¬Åâœsteep declineÃ¢â¬~ in congressional testimony. He pointed out that economic losses are most harshly felt by small businesses.

"Businesses within the travel sector are particularly dependent on reliable and efficient air travel. Over 95 percent of travel and tourism businesses are small businesses: 98 percent have 100 or fewer employees and 99.5 percent have 500 or fewer employees. Anything that affects air travel in the United States hits these small businesses harder," said Mr Dow.

---Popular tourist areas dependent on air arrivals are going to be impacted the most by cutbacks, say tourism officials.

"Approximately 80 percent of Scottsdale's visitors arrive by airplane, so any factors that negatively impact air travel will impact our tourism business," said Brent DeRaad, executive vice president of the Scottsdale Convention & Visitors Bureau. He said other air-dependent markets, such as Las Vegas and Hawaii, also will suffer.

How much of an airline cutback will there be? About 33 percent of the 100 most busy airports in the US are expected to experience a reduction in domestic flights as Americans cut back on air travel, according to AHS news.

The bleak forecast will likely be felt by October. The downturn would affect even the large gateways as major air carriers like American Airlines, United and Delta, which have unveiled 10% to 14% reductions in their domestic capacities by the end of the 3rd quarter.

All this has led to a call for the return to the old days before 1978 when deregulation started. One of the most prominent advocates in recent weeks: Robert Crandal, former American Airlines Chief Executive Officer.

"It is time to acknowledge that airlines look and are more like utilities than ordinary businesses," Crandall said during a speech last month. "I think a dollop of regulation, along with new government policies and appropriate investment, would help the carriers get back on the right track."

On the other hand, Delta President and Chief Financial Officer Edward Bastian said he believes deregulation "has been a great success."

"Air travel today has never been more affordable and significantly lower in real dollar costs," Mr Bastian said. "It's almost half what it was prior to deregulation."

But Mr Crandall believes deregulation has "worked poorly" in the airline industry.

"Market forces alone cannot and will not produce a satisfactory airline industry, which clearly needs some help to solve its pricing, cost and operating problems," he said.

He proposed regulation limiting airline schedules to address congestion, creating financial standards, addressing labor issues, managing bankruptcies and revising anti-trust laws.

Mr Crandall also suggested establishing a minimum-fare threshold.

Report by David Wilkening

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Your Comments (1)

Bravo!

Robert Crandell is right on the money or their lack of in the Airline Industry today as we face catastrofic failures here in the USA and EMEA. I will never forget the day when I was off-loaded on a AA flight because Mr. Crandell showed up last minute. I graciously gave up my seat, not! Had too and did not mind a bit. Regulation is the only way to stabalize a kamakasi industry will all looking at market share, overlapping routes and competing for failure at the end result with airline operating costs souring

By Robert Golden, Thursday, July 3, 2008