BY CLIFFORD F. LYNCH
fastlane
Is it time to re-regulate
the airlines?
IN THIS AGE OF DELAYED FLIGHTS, RISING FARES, CONFUSING
price structures, congested airports, mounting fees, and generally
poor service, more and more travelers are beginning to reconsider
their position on regulation of the airline industry.
In many cases, it’s a bit of a “Catch 22” for the airlines. No one can
legitimately argue that fuel costs have not had an adverse effect on
airline costs and resulting airfares. Airlines have low fixed costs and
high variable costs, with much of the latter consisting of fuel expenses. For example, with jet fuel at $3.17 per gallon, the fuel cost per hour
for a DC- 10 in flight would be $7,624 and for a 747, $10,813.
Obviously, these costs must be recouped
through fares, but this is not the major complaint
of most of today’s passengers, particularly business
travelers. The concern is the product being
received for the price paid. First of all, the fares are
both high and erratic, varying with Saturday stay-overs, lead time, and other considerations. It is not
uncommon to have a variety of fares represented
on a given flight among passengers with similar
itineraries.
Second, the fees are a major irritation to many
fliers. In 2010, airline revenues from bag fees
totaled $3.4 billion. The baggage charges have
resulted in more carry-ons with no space left for the last passengers
to board the aircraft. Oh, by the way, don’t forget to pay the fee for the
extra leg room if you want some semblance of comfort.
Obviously, poor service, such as flight delays, is not always the fault
of the airlines, but when it is, it just compounds an already unpleasant experience.
Mergers have created further unpleasantness and expense in some
cities. My hometown of Memphis is a case in point. Since Delta’s
acquisition of Northwest in 2008, flights out of Memphis have been
reduced by 33 percent. Memphis’s recent average airfare was third
highest among the country’s 100 airports and 31 percent higher than
the national average. The point was brought home to me when I paid
$1,093 roundtrip to go to a meeting in Chicago. This was with two
weeks’ notice and no Saturday stay-over. I would have been better off
if the meeting had been in Paris. One of our local wags has started a
Facebook page titled “Delta Does Memphis,” and it already has 1,500
members. Delta cites high fuel costs, but it appears to be more like the
time-honored practice of charging whatever the market will bear.
Is re-regulation the answer? Many think so. As
a longtime proponent of deregulation, I am on
the fence on this one.
The Airline Deregulation Act was signed into
law on Oct. 24, 1978. Prior to that time, the Civil
For several years, it seemed
to work. Fares did go down, and new airlines
entered the market. Frequent flier programs were
introduced—a wonderful perk for the business
traveler.
The trend seems to have reversed itself, however. The stated goals of the 1978 act are no longer
being achieved. It is even difficult to redeem
earned miles on some airlines. I believe it is time
for the airline regulation question to be revisited.
While I hope that re-regulation is not the only
answer to the problem, it is one that must be seriously considered. ;
Clifford F. Lynch is principal of C.F. Lynch & Associates, a provider
of logistics management advisory services, and author of Logistics
Outsourcing – A Management Guide and co-author of The Role of
Transportation in the Supply Chain. He can be reached at
cliff@cflynch.com.
