Back in the 1980s and early 90s I lived and worked off and on in Binghamton in the southern tier of New York State. This was historically a very prosperous area dating back to before the revolutionary war days, being an an important port at the confluence of the Chenango and Susquehanna Rivers. It continued to be prosperous during the 19th century and the city and adjoining towns grew quickly. In the early 20th century the Endicott-Johnson Shoe Company employed thousands of people, amongst them many new immigrants. One of the things heard by people from immigrants leaving Ellis Island were people who spoke little English asking, "which way EJ?" IBM had its founding as a modern company in the Binghamton suburb of Endicott. It remained a busy manufacturing facility as well as having their Glendale Labs there until the mid-1990's. Edwin Link founded Link Aviation in Binghamton and invented the flight simulator. The Link Trainers also known as Blue Boxes were used in World War II to give basic flight training to young pilots with no aviation experience. It grew into a company that at its height employed almost 5000 employees and was the leader in flight simulation. General Electric had a large high tech facility. Other companies popped up and added high tech, high paying jobs, like Universal Instruments, photography company GAF, and many smaller companies that did contracting work for the larger industries. Binghamton had a VHF TV station, WBNG channel 12) years before many much larger cities had any TV.
In the 1980's this area peaked and quickly declined. Early on, you could see how busy the area was by just showing up at Binghamton Regional Airport at 7am any weekday morning. There were at least 2 or 3 large jets going to USAir hubs, along with dozens of turboprops going to all the New York City area airports, Boston, Washington, and around the state. These were planes filled with business travelers from Singer-Link, IBM, GE and numerous other local companies.
There were numerous factors that caused the decline of the area, not the least being an over regulated and over taxed business community. Endicott-Johnson moved it shoe manufacturing to countries with cheaper labor. There is no more EJ in the USA. IBM decided that rather than caving to the high tax schemes of New York State politicians in Albany, closed most of it's factories in the state and moved a large portion of its business to places like North Carolina. Singer-Link had a lot of issues, with arrogance and mismanagement not being at the bottom the reasons for their demise. The Link Division of the Singer Company began losing contracts and new business to the competition from abroad, especially in the commercial business. They introduced technology didn't work well and attempted to shove it down the throats of customers, and lost them in droves. The entire Singer Company was bought out by Paul Bilzerian and he promptly sold off the divisions he could at a huge profit. The military systems division of Singer-Link was sold to a Canadian simulator manufacturer CAE Electronics. The commercial business was not so easy to sell, as its was not an entirely independent entity. All of it's manufacturing was done in the plant that made the military based equipment. That piece of Link was only sold after Bilzerian sold off all the divisions, declared bankruptcy and was in the process of shutting down what whatever was left. Bilzerian later went to Club Fed for a year for SEC violations. A Maryland Company, AAI Corporation, bought the commercial assets and tried to make a go of it, but due to law suites by CAE over technology rights and the fact that the company had lost credibility, it t lasted only about a year. The current owners, L3 Communications, of the company that Ed Link built now employs fewer than 100 people on top secret projects that can not be moved to other contractors.
Other companies either failed or moved. GAF is long gone, Universal Instruments moved most of its business abroad, GE sold the division to British Aerospace, and they have significantly downsized their operation and may leave shortly. The area that was once a mini Silicon Valley, is now a mini Death Valley. Downtown Binghamton is a dismal place full of closed and boarded up buildings. It's amazing that Boscov's Department Store can remain in business there. There is little else left besides government buildings and a few banks. The airport is almost vacant and the remaining airlines board fewer than 300 passengers a day to just one or two airports.
So what caused the decline and abandonment? First, high corporate taxes, over regulation and union problems drove many companies south. Second, bad and corrupt management of certain companies sped up their doom. And finally, the high cost of labor forced the rest to choose more fertile grounds to expand their business. This is an area that I love, but it is a shell of what it used to be, and is a perfect example of government trying to tax companies and people to prosperity.
Friday, July 29, 2011
Wednesday, July 20, 2011
Essential Air Service
When I was reading my news feed this morning, I read that Delta Airlines plans to end service to 24 small towns that it serves through one of their Delta Connection carriers using turboprop aircraft. Some of the towns have less than 9,000 residents, and their planes are departing less than half full. All the subject airports that Delta currently serves are taxpayer subsidized through the Essential Air Service Program enacted by congress at the time of airline deregulation in 1978. Delta released a press release explaining that these communities are losing money, even under subsidy, and furthermore Delta is retiring their aging fleet of turboprops and 50 seat regional jets.
So what is this program and why is it necessary, or as I'm about to argue, an unnecessary burden on taxpayers?
In a nutshell the EAS program heavily subsidizes the airline(s) selected by the program administrators based on competitive bidding by carriers wishing to operate under subsidy. The EAS program office has published a history of the program. In Delta's press release, they gave a brief explanation of the purpose of the program.
Other communities, mostly in the lightly populated western states, the argument can be made that subsidized air service is still necessary. In a few cases, these towns are hundreds of miles from the nearest large or even medium sized city. Still this list can be trimmed town to a small fraction of towns where government subsidized air service can be deemed necessary in the 21st century. I went through the list with my atlas and the list can be reduced by 90% saving the taxpayers tens of millions of dollars annually.
This program is just one example of waste, and you may say, it is small potatoes when we are talking about current level of government spending. However, if the president went through his budget with a fine toothed comb and line by line, as he promised during the campaign, and removed waste and overspending, and we had responsible people in Congress, we could get our debt under control, and actually have balanced budgets. Unfortunately I don't see this anytime in the foreseeable future, or dare say in my lifetime.
Correction and update: I've cleaned up my typos and need to hat tip the New York Times (via Yahoo Business). I apologize for the omission.
So what is this program and why is it necessary, or as I'm about to argue, an unnecessary burden on taxpayers?
In a nutshell the EAS program heavily subsidizes the airline(s) selected by the program administrators based on competitive bidding by carriers wishing to operate under subsidy. The EAS program office has published a history of the program. In Delta's press release, they gave a brief explanation of the purpose of the program.
The EAS program was created to ensure small communities continue to have access to passenger air service. In some cases, airline service in EAS markets is subsidized by the government. The Airline Deregulation Act of 1978 provides that if a carrier is held in beyond the 90-day notice period, it is entitled to receive compensation "to pay for the fully allocated actual cost to the carrier of performing the ...service ... plus a reasonable return on investment that is at least 5 percent of operating costs; and to provide the carrier an additional return that recognizes the demonstrated additional lost profits from opportunities foregone [by continuing to be held in and providing service].So essentially the US taxpayer is paying airlines a rather substantial subsidy, including a profit margin to entice them to operate to communities that could not support air travel otherwise. Basically any airport that had service prior to deregulation is eligible for EAS provided they are more than 70 miles from the nearest commercial airport. The entire list of cities served by this program as of May 2010 can be read here. Some cities are extremely close to major airports that in many cases are airline hubs. Two that stuck out to me immediately were Jackson, TN, and Jonesboro, AR. Both of these cities are 60 to 90 minutes from Memphis International Airport. Is there any reason why we the taxpayers should be paying airlines to fly to cities like these that enplane less than 50 passengers a day and are an easy drive to a major airport? Some states with powerful Senators and Congressmen have added pork to keep air service to towns that are in close proximity to one another, and not all that far from a commercial airport. If you look at the spreadsheet to which I linked, the kings of subsidized airline pork include West Virginia, and Pennsylvania, including the late John Murtha's pork laden Johnstown Airport. That particular airport is currently getting a second parallel runway built long enough to support large jets, but that is a different subject for a different blog post.
Other communities, mostly in the lightly populated western states, the argument can be made that subsidized air service is still necessary. In a few cases, these towns are hundreds of miles from the nearest large or even medium sized city. Still this list can be trimmed town to a small fraction of towns where government subsidized air service can be deemed necessary in the 21st century. I went through the list with my atlas and the list can be reduced by 90% saving the taxpayers tens of millions of dollars annually.
This program is just one example of waste, and you may say, it is small potatoes when we are talking about current level of government spending. However, if the president went through his budget with a fine toothed comb and line by line, as he promised during the campaign, and removed waste and overspending, and we had responsible people in Congress, we could get our debt under control, and actually have balanced budgets. Unfortunately I don't see this anytime in the foreseeable future, or dare say in my lifetime.
Correction and update: I've cleaned up my typos and need to hat tip the New York Times (via Yahoo Business). I apologize for the omission.
Tuesday, July 19, 2011
FAA Reauthorization Bill and what it means to aviation
Jazz Shaw over at the excellent blog HotAir posts an excellent and somewhat worrisome piece regarding the FAA Reauthorization Bill, which must be passed very quickly if the entire civil air traffic is to remain operational. Please read the whole article. Of course Congress is working diligently porking up the bill in order to bring money to their own districts without consideration to what is actually necessary and what can be cut out with what President Obama called "his scalpel", which is pretty much standard operating procedure for Congress, even in these tough times.
I can only scratch the surface as to what the FAA does here and could easily write volumes on the subject, but here goes. First a little background on what the FAA is and why it is an essential agency. Some of the comments I read at HotAir were very naive to assume that the airlines could just continue with out the FAA support mechanisms in place. That's plane fantasy (pun intended). The air traffic control system in the USA for all its faults is still the best, most comprehensive and efficient in the world. The amounts of flights they handle per day is far larger than the rest of the world combined. So lets put this myth aside, the FAA shuts down, the friendly skies will suddenly be empty, with the exception of military operations. Even they rely on the civilian air traffic control system over most airspace, as they share the same airways as your flight to visit mom and dad in Springfield (you pick the state). We can all remember the 9/11/2001 attacks, and the shutdown of the entire airspace over the US, and that will happen if the FAA is defunded. The economy took a huge hit and was one of the factors that drove a few airlines out of business, and several others eventually into Chapter 11. Our Congress-critters will be forced to revert to ground transportation to return to their districts is probably a bigger motivator for some of out less scrupulous representatives and Senators to get it done. (Yes I can be a cynic).
Ok, we've covered why having a functional air traffic control system is essential just to keep planes in the air. Now, lets talk about what else they do that affects me and my job.
Like many, if not most government agencies, they are bloated at the top and at some middle and lower levels of management, but having to deal with the nice folks in our local Flight Standards District Office (FSDO) and the National Simulator Evaluation Team (NSET), the people I personally deal with most, I'm here to tell you that these people are understaffed, work a lot of hours, and are always begging for more personnel as airlines expand, flight training facilities grow more numerous and demand increases. Are these people necessary? Well if we were the wild west, with no regulations and and everyone was free to operate as they want, the regulators would be unnecessary, but in a modern world we need these folks as the regulators and rule enforcers, Without them, there are no checks and balances on how airlines, air taxi services, and general aviation maintain their equipment, train their pilots and mechanics and the quality of airplane maintenance, pilot training and operation of the airlines. Can some of the rules and regulations be overkill, needless and overly intrusive; you bet. But in a world that is increasingly complex, we need to have our Federal Air Regulations (FAR).
The bureaucracy in DC is indeed bloated, politically motivated and makes decisions without considering real life decisions on the ground, but name one federal agency that isn't? That's where a lot of waste gets doled out, often to political cronies *gasp*. The people on the ground, or in the air, however the case may be that I work and interface with are very hard workers, fairly paid compared to their private sector counterparts, although there is bloated management at many levels, and in many cases even middle level managers are political hacks who have no idea what their people do for a living and what they need to do their jobs.
So finally in answer to Jazz's question and concern, forget about it buddy, there will be last minute funding. It might be ugly, but a shutdown is not an option.
Perhaps some of my tens of readers who work in aviation can contribute more to this piece, so comments are welcome, and I'll gladly elevate relevant ones as updates.
I can only scratch the surface as to what the FAA does here and could easily write volumes on the subject, but here goes. First a little background on what the FAA is and why it is an essential agency. Some of the comments I read at HotAir were very naive to assume that the airlines could just continue with out the FAA support mechanisms in place. That's plane fantasy (pun intended). The air traffic control system in the USA for all its faults is still the best, most comprehensive and efficient in the world. The amounts of flights they handle per day is far larger than the rest of the world combined. So lets put this myth aside, the FAA shuts down, the friendly skies will suddenly be empty, with the exception of military operations. Even they rely on the civilian air traffic control system over most airspace, as they share the same airways as your flight to visit mom and dad in Springfield (you pick the state). We can all remember the 9/11/2001 attacks, and the shutdown of the entire airspace over the US, and that will happen if the FAA is defunded. The economy took a huge hit and was one of the factors that drove a few airlines out of business, and several others eventually into Chapter 11. Our Congress-critters will be forced to revert to ground transportation to return to their districts is probably a bigger motivator for some of out less scrupulous representatives and Senators to get it done. (Yes I can be a cynic).
Ok, we've covered why having a functional air traffic control system is essential just to keep planes in the air. Now, lets talk about what else they do that affects me and my job.
Like many, if not most government agencies, they are bloated at the top and at some middle and lower levels of management, but having to deal with the nice folks in our local Flight Standards District Office (FSDO) and the National Simulator Evaluation Team (NSET), the people I personally deal with most, I'm here to tell you that these people are understaffed, work a lot of hours, and are always begging for more personnel as airlines expand, flight training facilities grow more numerous and demand increases. Are these people necessary? Well if we were the wild west, with no regulations and and everyone was free to operate as they want, the regulators would be unnecessary, but in a modern world we need these folks as the regulators and rule enforcers, Without them, there are no checks and balances on how airlines, air taxi services, and general aviation maintain their equipment, train their pilots and mechanics and the quality of airplane maintenance, pilot training and operation of the airlines. Can some of the rules and regulations be overkill, needless and overly intrusive; you bet. But in a world that is increasingly complex, we need to have our Federal Air Regulations (FAR).
The bureaucracy in DC is indeed bloated, politically motivated and makes decisions without considering real life decisions on the ground, but name one federal agency that isn't? That's where a lot of waste gets doled out, often to political cronies *gasp*. The people on the ground, or in the air, however the case may be that I work and interface with are very hard workers, fairly paid compared to their private sector counterparts, although there is bloated management at many levels, and in many cases even middle level managers are political hacks who have no idea what their people do for a living and what they need to do their jobs.
So finally in answer to Jazz's question and concern, forget about it buddy, there will be last minute funding. It might be ugly, but a shutdown is not an option.
Perhaps some of my tens of readers who work in aviation can contribute more to this piece, so comments are welcome, and I'll gladly elevate relevant ones as updates.
Sunday, July 17, 2011
Success from a country of failure
I've been hesitant to write this piece, because is very personal to me and my friend Ron.
I first met Ron when he was a young teenager, a poor kid living in Iligan in the jihadist ridden territory of Lanao del Norte in western Mindanao in the Philippines when he was 16. His father was a local politician and was murdered by the "religion of peace" and he and his family didn't have a support mechanism like a fundraiser to help them out. Needless to say he and his family had hard times. Ron, not being one to just roll over finished high school, went on to the Iligan Institute of Technology, part of Mindanao State University, and graduated with high honors in computer engineering. He initially had a hard time finding a job. It's even harder to get a job there than in our "Summer of Recovery". Well that didn't work out so well.
Ron worked midnight shift call centers, took crappy jobs, and finally found a teaching job. It paid the bills, almost, but he wasn't going anywhere with that job. We chatted about a strategy a lot and his best bet was to find work overseas. Ron was thinking Qatar or UAE, and I was thinking FUCK NO. Filipinos in Arab countries are slaves. Well Ron finally has found a decent paying job in Singapore, living in ok conditions, and being respected by his students. I'm not sure he is getting the pay he deserves for what his employer gives him, but he is doing much better than a year ago, and can go home and face his family with honor.
I'm wishing my friend Ron all the success in the world. I love this guy like he is one of my own, and am proud of all his achievements against a lot of odds.
We Americans don't know just how good we have it.
I first met Ron when he was a young teenager, a poor kid living in Iligan in the jihadist ridden territory of Lanao del Norte in western Mindanao in the Philippines when he was 16. His father was a local politician and was murdered by the "religion of peace" and he and his family didn't have a support mechanism like a fundraiser to help them out. Needless to say he and his family had hard times. Ron, not being one to just roll over finished high school, went on to the Iligan Institute of Technology, part of Mindanao State University, and graduated with high honors in computer engineering. He initially had a hard time finding a job. It's even harder to get a job there than in our "Summer of Recovery". Well that didn't work out so well.
Ron worked midnight shift call centers, took crappy jobs, and finally found a teaching job. It paid the bills, almost, but he wasn't going anywhere with that job. We chatted about a strategy a lot and his best bet was to find work overseas. Ron was thinking Qatar or UAE, and I was thinking FUCK NO. Filipinos in Arab countries are slaves. Well Ron finally has found a decent paying job in Singapore, living in ok conditions, and being respected by his students. I'm not sure he is getting the pay he deserves for what his employer gives him, but he is doing much better than a year ago, and can go home and face his family with honor.
I'm wishing my friend Ron all the success in the world. I love this guy like he is one of my own, and am proud of all his achievements against a lot of odds.
We Americans don't know just how good we have it.
Friday, July 15, 2011
Modern Air Travel: A Historical Perspective
I'm a pretty experienced traveler, and over the years I've learned a few things. Travel was far more simple back before 9/11/2001, and even more simple back in the 1970's before deregulation. Anyone who was born before 1970 and did any air travel at all remembers the days of regulated airlines. I'm tempted to call them the good old days, but they certainly had their ups and downs. Making a reservation meant going to a travel agent in most cases, because travel could often entail flying on 2 or more airlines in order to get you to your destination and the reservation systems were not computerized or even interlined between carriers. The travel agents had to work for their money, and booking even a simple trip could take hours or days to have them confirmed. A lot of phone calls needed to be made. The routes were regulated, so most of us had a choice of one airline, especially if you were from a smaller city, and the flights were subsidized, so there was little incentive for the airlines to fill the planes. Flights also were prohibitively expensive, especially out of captive markets, which were most of them. A flight from Scranton/Wilkes-Barre to Columbus, when I was a college student was $350 round trip, and that is in 1976 dollars. On the upside, flights rarely got canceled and when one was unless it was truly a weather related problem or a mechanical breakdown. The airlines operated on schedule and pretty much on-time, meals were served, even on a short flight, and drinks were free.
Deregulation totally revamped the industry, along with the internet and the computer revolution. Airlines were free to fly where they wanted, expand their system, and compete on routes that were once monopolies. The airfares plummeted, and the $99 coast-to-coast fare became common. Airlines that used to be regional carriers like Allegheny (soon to be USAir), Piedmont, North Central, and Southern, expanded their route systems by leaps and bounds. They lost money on every flight, but it didn't seem to matter at the time. Upstart airlines like People Express with a non-unionized workforce, low paid workers, and super cheap airfares forced the big guys to cut their fares. These were the salad days of deregulation, and the consumer was king. The flight I used to pay $350 for was now $120 round trip. Airlines were desperate to build up customer loyalty and American Airlines had a very novel concept that changed everything, the frequent flier program. Enroll in this program, and you would receive a coupon book. Just have the gate agent pull one of those coupons every time you fly, and you gain points that would be good for certificates after a number of miles flown, and fly for free. It was clumsy by today's standards, but it changes everything. Within a year, all the major airlines adopted a frequent flier program. It was often hard to use the points though because seats were capacity controlled, and often there was only one or two seats available for this kind of travel. That soon changed as competition forced the airlines to ease up restrictions.
Small regional carriers soon became national, thanks to both growth and acquisition. Delta bought Northeastern Airlines, Allegheny bought Mohawk, Southern and North-Central merged to create Republic Airlines. Braniff International, who had very lucrative South American routes, decided to go big time and fly to Asia and Europe, and even lease a Concorde on routes from London. Long time behemoths like Pan Am and Eastern couldn't compete with younger carriers, had restrictive labor contracts and were strike prone just couldn't adapt. Both airlines went belly up in the late 80's. Deregulation was also not kind to airlines who decided to expand too quickly. Braniff over expanded and took on routes that just were not their. They were the first major airline to go under. American Airlines helped them along by matching their airfares and temporarily flying to traditional Braniff cities. Southwest Airlines which was just a regional airline, known for hourly service for hourly flights between Dallas Love Field and Houston Hobby Airport went national, and their business model has been studied and used by airlines worldwide on how to run a low cost airline.
With deregulation we also had winners and losers that was either market driven, and/or management driven. Corporate raiders like Frank Lorenzo and Carl Icahn bought out Continental Airlines and TWA respectively. Lorenzo then raided Eastern Airlines, and stripped it of all marketable assets and routes to feed Continental. Between incompetent management under Lorenzo along with long standing serious union problems, forced a strike that Eastern never recovered from and soon went out of business. Non-union Continental overextended itself by buying People Express and Frontier Airlines (not the Frontier that is flying today), and soon found itself in bankruptcy court. Lorenzo was forced to give up control under the reorganization agreement, and what emerged was a smaller and healthier Continental. In the case of TWA, Icahn bled it dry and put no money into modernizing it's fleet. They slowly faded away, went through 2 bankruptcies and was finally bought by American Airlines in 2001. Many other airlines popped up and just as quickly went out of business during the 80's and 90's, with very few start-ups being successful. ValuJet (now AirTran Airways) and Jet Blue have been exceptions, having good business models and modern jet fleets.
With the late 80's and 90's came a big round of consolidation, and the public was poorer for it with reduced service and higher prices. Airlines continues mergers and buy-outs at a fast pace. Many familiar formerly regional airlines began being bought by the larger carriers. As an example, USAir bought Piedmont and PSA and soon became a major national powerhouse, at the loss to many smaller cities once served by the three carriers. In many cases cities that once had DC-9 or 737 service now had 19 seat turboprops and the airfares skyrocketed to these airports. For many travelers the benefits of deregulation seemed to come full circle, with high prices and bad service and there was a movement to re-regulate at least to a point.
In the 90's, as reservation systems became more automated and computerized, the major airlines forged alliances with smaller commuter carriers, and their flights operated under the major carriers' airline code. By looking at a ticket, it was hard to know if you were flying on the major or a commuter outfit. Companies such as Comair and Skywest were soon operating as Delta Connection with much smaller equipment, and at a much lower cost than the major carrier, but it provided what was marketed as a seamless connection to the major carrier at one of the hubs. This provided convenience to passengers, but did little to relieve the high cost of flying into small and mid-size cities.
In the early 1990's Bombardier Aerospace in Montreal, Canada introduced the 50 seat Canadair Regional Jet. This revolutionized service, albeit temporarily, to small and mid-size cities across the country. The major carriers bought these airplanes by the hundreds, dry leased them to their regional partners, and cities that had been deprived of jet service soon had it restored. The planes, though crowded, were a vast improvement over the much slower turboprops. Soon afterwards, Brazil's Embraer introduced their own 50 seat regional jet and the airlines now had a cheaper and more efficient means to service their markets.
It didn't take long for the airlines to realize that they had stumbled on to a cash cow. The regional jets broke even at half capacity, had flight crews that made a fraction of the trunk carrier's pilots, and only needed one flight attendant. Airlines started move service to larger cities from larger trunk carrier planes, to regional jets, often with more frequent service, and used them on longer flights on the thinner routes. It became common to book a flight from Memphis to Phoenix only to find yourself shoehorned into a RJ for over 3 hours. In the meantime, many of the cities that had reaped the benefit of jet service, suddenly found themselves with less service, and in many cases reverted back to smaller turboprops. Embraer and Bombardier soon introduced 70 and 90 seat planes, and routes that used to be served by DC-9, 737, or MD-80 were now operated by the larger RJ's. This remains part of the business model by the legacy carriers to this day.
The first decade of the 21st century was a tumultuous one for the airline industry. About the time the airlines were at least breaking even, the Sept. 11, 2001 attacks on the World Trade Center and the Pentagon almost destroyed it. The whole aviation system was shut down for days, air travel plummeted, a recession raged, and the federal government hoisted the Transportation Administration Administration (TSA) upon us. Air travel became more inconvenient, less comfortable, and more intrusive as poorly trained TSA agents began random body searches, and restricting what can be carried on an airplane. Instead of profiling potential terrorists, everyone was subjected to often ridiculous scrutiny. Nail clippers were banned, liquids had to be under 3 ounces, and must fit in a one quart ziplock bag. Later on came subjecting passengers to x-ray machines, and full body searches. Many travelers who used to fly are now driving to their destination.
This was not a happy time for the major airlines either. Legacy carriers, Delta, Northwest, USAirways, America West, and United all filed Chapter 11 bankruptcy. Airfares went up, and the airlines were looking at ways to raise even more revenue. Meal service soon ended in coach, and on soon on some carriers, snacks were no longer available. Checked baggage, which used to be included in the cost of the ticket, now became an extra, as much as $25 each way for the first checked bag and more for the second or third.
While the behemoths lingered in bankruptcy, a few low cost airlines turned a profit. Southwest continues to this day to not charge for checked baggage and is profitable enough to being able to purchase an equally profitable AirTran. The result of this merger still remains to be seen. JetBlue has been very successful as has Virgin America. The lean and mean airlines are going to be the survivors.
The 21st century has also brought about the merger of major airlines, to the detriment of their customers. Delta and Northwest both emerged from bankruptcy only to merge in to the "New Delta". The merger meant, that the Delta hub in Cincinnati shut down, the Northwest business unit in Minneapolis is closing, hubs in Memphis, Detroit and Minneapolis are being scaled back, and some cities that used to be served by both airlines are now served by neither. United and Continental are also in the process of merging, and it remains to be seen how the now largest airline in the world will do. Now in 2011, airlines are faced with $6.50 a gallon prices for Jet-A fuel, there are fewer choices, higher prices, poorer service. TSA has become an inefficient, authoritarian, and arbitrary security force. 95 year old great grandmothers in wheel chairs and 5 year old girls are being subjected to what in any other time would be felony sexual battery.
So the question remains, are the American people better served by airline deregulation, or would we be better off with a Civil Aeronautic Board assigning routes, assessing rates, and subsidizing poor performers?
I'm still in the camp of deregulation. In the past routes were subject to political pressure (even more than now), airlines were kept in business through tax payer subsidizes, and competition was nonexistent. Let the chips fall as they may, when one airline fails, someone comes along to fill the void, and cities who can not support profitable air service, probably don't need service.
Feel free to discuss here. Or send me hate messages on twitter @simkeith
Deregulation totally revamped the industry, along with the internet and the computer revolution. Airlines were free to fly where they wanted, expand their system, and compete on routes that were once monopolies. The airfares plummeted, and the $99 coast-to-coast fare became common. Airlines that used to be regional carriers like Allegheny (soon to be USAir), Piedmont, North Central, and Southern, expanded their route systems by leaps and bounds. They lost money on every flight, but it didn't seem to matter at the time. Upstart airlines like People Express with a non-unionized workforce, low paid workers, and super cheap airfares forced the big guys to cut their fares. These were the salad days of deregulation, and the consumer was king. The flight I used to pay $350 for was now $120 round trip. Airlines were desperate to build up customer loyalty and American Airlines had a very novel concept that changed everything, the frequent flier program. Enroll in this program, and you would receive a coupon book. Just have the gate agent pull one of those coupons every time you fly, and you gain points that would be good for certificates after a number of miles flown, and fly for free. It was clumsy by today's standards, but it changes everything. Within a year, all the major airlines adopted a frequent flier program. It was often hard to use the points though because seats were capacity controlled, and often there was only one or two seats available for this kind of travel. That soon changed as competition forced the airlines to ease up restrictions.
Small regional carriers soon became national, thanks to both growth and acquisition. Delta bought Northeastern Airlines, Allegheny bought Mohawk, Southern and North-Central merged to create Republic Airlines. Braniff International, who had very lucrative South American routes, decided to go big time and fly to Asia and Europe, and even lease a Concorde on routes from London. Long time behemoths like Pan Am and Eastern couldn't compete with younger carriers, had restrictive labor contracts and were strike prone just couldn't adapt. Both airlines went belly up in the late 80's. Deregulation was also not kind to airlines who decided to expand too quickly. Braniff over expanded and took on routes that just were not their. They were the first major airline to go under. American Airlines helped them along by matching their airfares and temporarily flying to traditional Braniff cities. Southwest Airlines which was just a regional airline, known for hourly service for hourly flights between Dallas Love Field and Houston Hobby Airport went national, and their business model has been studied and used by airlines worldwide on how to run a low cost airline.
With deregulation we also had winners and losers that was either market driven, and/or management driven. Corporate raiders like Frank Lorenzo and Carl Icahn bought out Continental Airlines and TWA respectively. Lorenzo then raided Eastern Airlines, and stripped it of all marketable assets and routes to feed Continental. Between incompetent management under Lorenzo along with long standing serious union problems, forced a strike that Eastern never recovered from and soon went out of business. Non-union Continental overextended itself by buying People Express and Frontier Airlines (not the Frontier that is flying today), and soon found itself in bankruptcy court. Lorenzo was forced to give up control under the reorganization agreement, and what emerged was a smaller and healthier Continental. In the case of TWA, Icahn bled it dry and put no money into modernizing it's fleet. They slowly faded away, went through 2 bankruptcies and was finally bought by American Airlines in 2001. Many other airlines popped up and just as quickly went out of business during the 80's and 90's, with very few start-ups being successful. ValuJet (now AirTran Airways) and Jet Blue have been exceptions, having good business models and modern jet fleets.
With the late 80's and 90's came a big round of consolidation, and the public was poorer for it with reduced service and higher prices. Airlines continues mergers and buy-outs at a fast pace. Many familiar formerly regional airlines began being bought by the larger carriers. As an example, USAir bought Piedmont and PSA and soon became a major national powerhouse, at the loss to many smaller cities once served by the three carriers. In many cases cities that once had DC-9 or 737 service now had 19 seat turboprops and the airfares skyrocketed to these airports. For many travelers the benefits of deregulation seemed to come full circle, with high prices and bad service and there was a movement to re-regulate at least to a point.
In the 90's, as reservation systems became more automated and computerized, the major airlines forged alliances with smaller commuter carriers, and their flights operated under the major carriers' airline code. By looking at a ticket, it was hard to know if you were flying on the major or a commuter outfit. Companies such as Comair and Skywest were soon operating as Delta Connection with much smaller equipment, and at a much lower cost than the major carrier, but it provided what was marketed as a seamless connection to the major carrier at one of the hubs. This provided convenience to passengers, but did little to relieve the high cost of flying into small and mid-size cities.
In the early 1990's Bombardier Aerospace in Montreal, Canada introduced the 50 seat Canadair Regional Jet. This revolutionized service, albeit temporarily, to small and mid-size cities across the country. The major carriers bought these airplanes by the hundreds, dry leased them to their regional partners, and cities that had been deprived of jet service soon had it restored. The planes, though crowded, were a vast improvement over the much slower turboprops. Soon afterwards, Brazil's Embraer introduced their own 50 seat regional jet and the airlines now had a cheaper and more efficient means to service their markets.
It didn't take long for the airlines to realize that they had stumbled on to a cash cow. The regional jets broke even at half capacity, had flight crews that made a fraction of the trunk carrier's pilots, and only needed one flight attendant. Airlines started move service to larger cities from larger trunk carrier planes, to regional jets, often with more frequent service, and used them on longer flights on the thinner routes. It became common to book a flight from Memphis to Phoenix only to find yourself shoehorned into a RJ for over 3 hours. In the meantime, many of the cities that had reaped the benefit of jet service, suddenly found themselves with less service, and in many cases reverted back to smaller turboprops. Embraer and Bombardier soon introduced 70 and 90 seat planes, and routes that used to be served by DC-9, 737, or MD-80 were now operated by the larger RJ's. This remains part of the business model by the legacy carriers to this day.
The first decade of the 21st century was a tumultuous one for the airline industry. About the time the airlines were at least breaking even, the Sept. 11, 2001 attacks on the World Trade Center and the Pentagon almost destroyed it. The whole aviation system was shut down for days, air travel plummeted, a recession raged, and the federal government hoisted the Transportation Administration Administration (TSA) upon us. Air travel became more inconvenient, less comfortable, and more intrusive as poorly trained TSA agents began random body searches, and restricting what can be carried on an airplane. Instead of profiling potential terrorists, everyone was subjected to often ridiculous scrutiny. Nail clippers were banned, liquids had to be under 3 ounces, and must fit in a one quart ziplock bag. Later on came subjecting passengers to x-ray machines, and full body searches. Many travelers who used to fly are now driving to their destination.
This was not a happy time for the major airlines either. Legacy carriers, Delta, Northwest, USAirways, America West, and United all filed Chapter 11 bankruptcy. Airfares went up, and the airlines were looking at ways to raise even more revenue. Meal service soon ended in coach, and on soon on some carriers, snacks were no longer available. Checked baggage, which used to be included in the cost of the ticket, now became an extra, as much as $25 each way for the first checked bag and more for the second or third.
While the behemoths lingered in bankruptcy, a few low cost airlines turned a profit. Southwest continues to this day to not charge for checked baggage and is profitable enough to being able to purchase an equally profitable AirTran. The result of this merger still remains to be seen. JetBlue has been very successful as has Virgin America. The lean and mean airlines are going to be the survivors.
The 21st century has also brought about the merger of major airlines, to the detriment of their customers. Delta and Northwest both emerged from bankruptcy only to merge in to the "New Delta". The merger meant, that the Delta hub in Cincinnati shut down, the Northwest business unit in Minneapolis is closing, hubs in Memphis, Detroit and Minneapolis are being scaled back, and some cities that used to be served by both airlines are now served by neither. United and Continental are also in the process of merging, and it remains to be seen how the now largest airline in the world will do. Now in 2011, airlines are faced with $6.50 a gallon prices for Jet-A fuel, there are fewer choices, higher prices, poorer service. TSA has become an inefficient, authoritarian, and arbitrary security force. 95 year old great grandmothers in wheel chairs and 5 year old girls are being subjected to what in any other time would be felony sexual battery.
So the question remains, are the American people better served by airline deregulation, or would we be better off with a Civil Aeronautic Board assigning routes, assessing rates, and subsidizing poor performers?
I'm still in the camp of deregulation. In the past routes were subject to political pressure (even more than now), airlines were kept in business through tax payer subsidizes, and competition was nonexistent. Let the chips fall as they may, when one airline fails, someone comes along to fill the void, and cities who can not support profitable air service, probably don't need service.
Feel free to discuss here. Or send me hate messages on twitter @simkeith
Monday, July 4, 2011
July 4th 2011 in San Francisco
Belated happy Independence Day to all. I'm currently on assignment in the San Francisco bay area and got to enjoy festivities here today, including a good baseball game at one of the best baseball stadiums in the major leagues I've watched a game, AT&T Park. Sadly for my local friends the Giants lost to the Padres 5-3.
I was invited and went to an Independence Day celebration that included mostly veterans, active duty military and tea party type people. A few local Democrat city council-critters showed up, and of course Code Pink had to be there to heckle the group. This was pretty small, maybe 200 people, and it was mostly a remeberance of those who sacrificed for our country and those who built it to be the shining star on the hill that Ronald Reagan once proclaimed us to be.
Like I said, this was a quiet crowd, and not very political, until the lefties showed up screaming slogans, calling us Nazis and wanting sent to death camps. The irony in this is that they got their loudist during the reading of the Delecration of Independence by a 91 year old World War II veteran who survived 2 years in one of Hitler's POW camps. This nice old gentleman finished reading the document, left the small stage, and walked over to the young girl, to ask what her problem was. Her answer was that he was the problem, and anyone who who has gone to war for any reason was as bad as Hitler. Yes, You get the drift, she is a moron. However this nice old man just gave her a kiss on the cheek and told her, that many of his friends died over 60 years ago so that she could show up there today to make a complete ass out of herself, and then he walked away. The Code Pink people continued to scream slogans, while the rest of us waved to them and offered coffee and pastries to them. There were no takers and that was there loss.
I was invited and went to an Independence Day celebration that included mostly veterans, active duty military and tea party type people. A few local Democrat city council-critters showed up, and of course Code Pink had to be there to heckle the group. This was pretty small, maybe 200 people, and it was mostly a remeberance of those who sacrificed for our country and those who built it to be the shining star on the hill that Ronald Reagan once proclaimed us to be.
Like I said, this was a quiet crowd, and not very political, until the lefties showed up screaming slogans, calling us Nazis and wanting sent to death camps. The irony in this is that they got their loudist during the reading of the Delecration of Independence by a 91 year old World War II veteran who survived 2 years in one of Hitler's POW camps. This nice old gentleman finished reading the document, left the small stage, and walked over to the young girl, to ask what her problem was. Her answer was that he was the problem, and anyone who who has gone to war for any reason was as bad as Hitler. Yes, You get the drift, she is a moron. However this nice old man just gave her a kiss on the cheek and told her, that many of his friends died over 60 years ago so that she could show up there today to make a complete ass out of herself, and then he walked away. The Code Pink people continued to scream slogans, while the rest of us waved to them and offered coffee and pastries to them. There were no takers and that was there loss.
Saturday, July 2, 2011
Adventures in Air Travel. Failure and Success
Anyone who travels by air these days, knows the frustrations that go with it. Between the airlines nickeling and diming us to death with hidden fees, charges for everything but breathign air, tactical cancellations of flights (they can almost always get away with blaming weather), and the horrors that are inflicted on us by the incompetent, totalitarian, and soon to be unionized TSA, meaning even the most incompetent and corrupt of them won't be able to be fired.
However I've got a bad news-good news story to relay to my tens of readers. This past week, I was flying from Memphis to San Francisco, with a plane change in Salt Lake City, and everything was going swimmingly right up until the airplane's door was about to close. Then 2 mechanics came on board, and there was a long conversation between the crew chief and the captain, and shortly after, we heard the bad news. A careless dunderhead of a baggage handler struck the airplane with a belt loader and broke an antenna. Under Delta's Minimum Equipment List (MEL), that the FAA approves and enforces, that is a no fly restriction. I figured immediately, that I'm not going anywhere that night, as there was no other possible connection after this. However, the captain told us that it was just the antenna for the inflight internet service and they should quickly get this resolved. Well one hour goes by, with frequent updated by the outstanding captain, who was great through all this, and then 1.5 hours, and finally, the Delta maintenance management gave the go ahead to depart. All the passengers knew that we had missed our connections, and many of us asked to get off the plane and rebook for the next day, but the ground service agents in Memphis wouldn't allow it. I asked why, and the agent with an obvious "Memphis Attitude" (who was mostl likely was a former Northwest employee and treated us with the former Northwest Airlines customer service approach) told me, that that would cause her to file a lot of paperwork and it was far easier for her to make all of us SLC's problem. Really nice, eh?
Ok, we arrive in SLC 2 hours late, and I experienced the exact opposite attitude from the folks there. They had portable kiosks opened up with a dozen CSR's passing out vouchers for lodging and meals as well as boarding passes for the earliest flight the next day. What a difference 2 cities made. I ended up at a rather upscale airport hotel (yes they do exist once again), vouchers for 2 meals...well, $6 vouchers, but nont the less, it is better than anyone offered us in MEM.
To top it all off, I got bumped to first class on the flight to SFO, meaning that I could take the snacks from the basket myself and get a shot of Bailey's in my coffee in the morning. So kudos to the Delta CSR's at SLC for really providing customer service to people who really needed it. I got to my destination a bit late but not worse for wear.
TSA in SLC was as incomepent as any other airport I've been through. I got directed to one of those "low level" x-ray machines, along with a half dozen from my line. Well all of us ended up getting the pat down because one of those soon to be unionized government employees, didn't know how to operate the equipment and all the images were unreadable. The guy who patted me down went a bit further, sticking his hand down the front and back of my pants, and seemed to really be enjoying it. I finally told him, in my usual tactful way, "Hey why don't you just give me a blowjob and be done with it." He smiled, winked, and I went on my way extremely creeped out. Remember folks they are from the government and here to protect us.
So there you have it, the good, the bad and the ugly all within about 15 hours.
As I posted earlier, ain't air travel grand?
However I've got a bad news-good news story to relay to my tens of readers. This past week, I was flying from Memphis to San Francisco, with a plane change in Salt Lake City, and everything was going swimmingly right up until the airplane's door was about to close. Then 2 mechanics came on board, and there was a long conversation between the crew chief and the captain, and shortly after, we heard the bad news. A careless dunderhead of a baggage handler struck the airplane with a belt loader and broke an antenna. Under Delta's Minimum Equipment List (MEL), that the FAA approves and enforces, that is a no fly restriction. I figured immediately, that I'm not going anywhere that night, as there was no other possible connection after this. However, the captain told us that it was just the antenna for the inflight internet service and they should quickly get this resolved. Well one hour goes by, with frequent updated by the outstanding captain, who was great through all this, and then 1.5 hours, and finally, the Delta maintenance management gave the go ahead to depart. All the passengers knew that we had missed our connections, and many of us asked to get off the plane and rebook for the next day, but the ground service agents in Memphis wouldn't allow it. I asked why, and the agent with an obvious "Memphis Attitude" (who was mostl likely was a former Northwest employee and treated us with the former Northwest Airlines customer service approach) told me, that that would cause her to file a lot of paperwork and it was far easier for her to make all of us SLC's problem. Really nice, eh?
Ok, we arrive in SLC 2 hours late, and I experienced the exact opposite attitude from the folks there. They had portable kiosks opened up with a dozen CSR's passing out vouchers for lodging and meals as well as boarding passes for the earliest flight the next day. What a difference 2 cities made. I ended up at a rather upscale airport hotel (yes they do exist once again), vouchers for 2 meals...well, $6 vouchers, but nont the less, it is better than anyone offered us in MEM.
To top it all off, I got bumped to first class on the flight to SFO, meaning that I could take the snacks from the basket myself and get a shot of Bailey's in my coffee in the morning. So kudos to the Delta CSR's at SLC for really providing customer service to people who really needed it. I got to my destination a bit late but not worse for wear.
TSA in SLC was as incomepent as any other airport I've been through. I got directed to one of those "low level" x-ray machines, along with a half dozen from my line. Well all of us ended up getting the pat down because one of those soon to be unionized government employees, didn't know how to operate the equipment and all the images were unreadable. The guy who patted me down went a bit further, sticking his hand down the front and back of my pants, and seemed to really be enjoying it. I finally told him, in my usual tactful way, "Hey why don't you just give me a blowjob and be done with it." He smiled, winked, and I went on my way extremely creeped out. Remember folks they are from the government and here to protect us.
So there you have it, the good, the bad and the ugly all within about 15 hours.
As I posted earlier, ain't air travel grand?
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