 |
||||||||
 |
|
|||||||
|
||||||||
|
 |
A little help keeps skies friendly for the airlines
© St. Petersburg Times, Air travel and airlines once had more glamor. Pan Am symbolized sophistication and world travel. Eastern, headed by no less than an Apollo astronaut, grandly billed itself as "The Wings of Man." Carriers strove for individual personalities and brand loyalty. Even before Sept. 11, 2001, no major modern airline could claim such a distinct image, with the possible exception of Southwest. (What other organization seemed to have as much fun just doing its job? Who else would end a reassuring e-mail to its employees with, "We love you!"?) But for the most part, the air travel industry had become the victim of its own popularity. Since deregulation in 1978, annual passenger trips in the United States have soared from 275-million to 660-million annually. In return for cheaper fares, Americans had to accept crowded seats, service stretched thin, and ever-increasing delays. Even so, airlines lost money, went bankrupt, or were forced to merge. I once asked a smart friend: How come the free market laws of supply and demand don't work for airlines? Why can't they settle down and find a price that the market will bear but will allow them to make a decent profit? His answer was that airline seats are a unique commodity. When apples aren't selling, the grocer can order fewer apples. But the "supply" of seats is fixed by the size of airplanes and routes set months in advance. Most costs are fixed because of schedule commitments, labor contracts, debt payments and so forth. You can't put the seat "back on the shelf" to use next time. The instant the plane takes off, an empty seat is worthless. As tough as things had gotten, they became an order of magnitude worse on Sept. 11. Every air carrier in the nation lost several days of gross revenue. After air travel resumed, ticket sales were devastated because of fear and uncertainty. Airlines are laying off tens of thousands of workers and cutting schedules by 20 percent or more. Now Congress is lending an unprecedented helping hand to the entire airline industry, a bailout of billions in help and loan guarantees. "In a free-market situation, I'd let these guys fight it out, sink or swim on their own merits," Dean Headley said in an interview. He's a professor at Wichita State University and co-author of a national publication called the Airline Quality Rating. But this is not a free-market situation, Headley argues. In a normal free market, "deserving" competitors succeed and "nondeserving" competitors fail. But here a catastrophe has struck an entire sector of the U.S. economy, threatening its total existence. The nation is dependent on air traffic not just for transportation, but for cargo and mail. Whether or not a particular airline survives, there is a public interest in making sure that somebody does. In 1980, we decided that the survival of even an individual automaker, Chrysler, was important enough to the nation to warrant a bailout. Headley's argument is we should let the airline industry survive this temporary emergency, at least long enough for the individual airlines to demonstrate their merit to Wall Street investors. "All they should do is supply some assurances that airlines will have a chance to right their own ship," he said. Even the Cato Institute, a well-known libertarian think tank -- which opposed the Chrysler bailout two decades ago -- is struggling with this one and has taken no official position. Ed Hudgins, the institute's director of regulatory studies, said in an interview we need to make sure we are helping the airlines survive the terrorist attack, and not just propping up individual companies that already were headed for free-market failure. It is one thing to say companies should sink or swim in the free market -- but another thing to say that if an anvil drops on them while they're swimming, it's wrong to help. Put another way: Even a libertarian stops debating principle and calls the fire department when his house is burning down. - You can reach Howard Troxler at (727) 893-8505 or at troxler@sptimes.com.
 © 2006 • All Rights Reserved • St. Petersburg Times
490 First Avenue South • St. Petersburg, FL 33701 • 727-893-8111 
|
|
Times columns today Howard Troxler Jan Glidewell Sara Fritz From the Times Metro desk |
