Airline deregulation was opposed by nearly all US airlines in 1978. It was championed by Senator Ted Kennedy (and his aide now Justice Stephen Breyer) and by consumer advocate Ralph Nader and signed into law by Jimmy Carter.
President Carter signs the Airline Deregulation Act, by Jack E. Kightlinger (Public domain)
Bob Crandall was against deregulation then, and he’s against it now in retirement. And he’s blaming it for cramped airline seating. He also calls codesharing a ‘fraud’ to fool people.
Of course codesharing is an artifact of the regulated era. Airlines didn’t have their own nationwide networks but exchanged passengers at connecting points. And outside of anti-trust immunized joint ventures, which allow airlines to coordinate on schedules and pricing, codesharing can increase competition by having more than one airline selling seats on the same aircraft.
The major problem is technological, where codeshare passengers don’t have the same treatment or access to services as passengers on an airline’s own marketed code — often the airline selling a codeshare cannot even assign seats, and sometimes the airline operating the flight cannot do so either because of the codeshare.
However it’s Crandall’s point about deregulation and cramped seating that deserves a closer look.
What Deregulation Changed
In the regulated era there was no reason to ‘densify’ aircraft because planes weren’t very full. The federal government’s Civil Aeronatics Board decided who could fly where and how much they could charge. Prices were set at a level to ensure airline profitability. The role of the federal government was to make sure airlines made money. It wasn’t to protect consumers.
At high fares fewer people flew. So there were often empty middle seats, which by the way is the single most significant factor in determining whether or not you enjoy your flight.
It’s no surprise that once the federal government stopped demanding high fares that airlines competed down prices and more people started flying. That means less elbow room by virtue of fewer empty seats. In the regulated era those who flew had greater comfort, but now many more people have access to the skies.
Once deregulation stopped protecting airline profits, prices fell, and unsustainable businesses merged. Now load factors are higher.
A generation of ultra low cost carriers have helped to drive down prices, which the legacy airlines match. Spirit, Frontier, and Allegiant would have been illegal before 1978.
In an industry with revenue per passenger mile declining over time, airlines can increase their total revenue but need to keep costs in check and they do that by squeezing more seats into planes.
Crandall is correct that without deregulation we wouldn’t have seats squeezed closer together. But it’s a more complicated story, too, because most of us wouldn’t be flying in those more spacious seats either.
New Regulation Would Be Worse
The Department of Transportation wanted to regulate what fees customers were shown during the booking process. It wasn’t enough to display fees on a website, they proposed to require specific fees to be shown to all customers whenever schedules are shown.
I submitted a regulatory comment to the DOT suggesting that fixing in place exactly what every consumer sees was a bad idea. Instead of the same fees for all travelers on all trips, people need to be able to see the information that’s most relevant to them. That’s the innovation we need in online booking, which I saw coming, there were already nascent attempts (e.g. RouteHappy) that these rules would have squelched in their infancy.
The DOT rules didn’t anticipate basic economy — there would like have been a requirement to display checked bag fees, but not whether a carry on was even allowed (United still does not permit full-sized carry on bags on basic economy fares).
American’s re-introduction of carry ons for basic economy customers shows that consumers are getting smarter with the assistance of better tools. The airline explained that customers were able to realize that when they wanted to bring a carry on, that Delta offered lower fares.
The airline industry used to bet on consumers ‘not knowing the difference’ and treating all seats as equal. United’s President Scott Kirby has even described their schedule as being their product. But online booking is reaching a point where it can help consumers differentiate the product and that’s what we need to get to a place where airlines don’t only compete on schedule and price.
We’ve had a downward product spiral because consumers weren’t shown the difference, so it wasn’t a an area of differentiation at point of purchase. That’s beginning to change. We don’t want to crush that possibility in its infancy, adopting regulations that freeze in place the areas in which airlines compete.
What We Need to Improve Air Travel
Airlines don’t have monopoly pricing power. Though there are fewer competitors, the long run pricing trend has been down, not up.
However there’s little competition in business model and product. Indeed there’s little room for that competition. Most of the travel experience is controlled and even provided by government — airports, airport security, air traffic control. From the moment you hit the curb at the airport to the moment you’re on the plane, the government is in control (except in Branson, Missouri whose airport is private and in the handful of airports with private security overseen by TSA). From the moment a plane pushes back, until the moment it lands, the government is in control.
Copyright: cylonphoto / 123RF Stock Photo
Airlines are protected from competition — it’s difficult to start an airline (much easier to buy the operating certificate of an existing airline), so the number of carriers doesn’t grow. Foreign airlines can neither buy nor start carriers in the U.S. We need more airlines experimenting with more business models to disrupt the industry.
However more airlines won’t be enough in key markets because we need more air traffic capacity, Crandall actually supports this, pointing out that the U.S. is the only major country with air traffic control run by the same government agency that’s regulating it, “what we have today is so inefficient, it’s unbelievable.”
And we need to break up the government-airline monopoly on gates at congested airports. Alaska Airlines overpaid for Virgin America seeing no other way to gain access to gates in congested airports, because government-run airports enter into agreements with incumbent carriers that lock out competition, to the detriment of consumers.
In political science, situations where private companies become vampires/parasites that ultimately gain predominant control of the outcomes that indicate they have undue influence over government agencies (e.g., Air Traffic Control or local airport operating agencies/“port authorities”) such that these entities are more closely aligned to serve their corporote masters’/overlords’ needs/interests instead of the public’s, are typically defined as agencies whose missions have been subverted (some might say “perverted”), and the agency itself is “captured” (practically as if kidnapped when it comes to airlines and how they have now managed to get public agencies/government regulators serving NOT the public which pays the employees’ salaries directly via taxes and consumers/flyers through other user fees – remember, even if the cost per passenger to enplane is “paid” by the airline, those fees are paid by consumers and remitted to the operating agency in a fashion similar to say sales taxes where cosumers pay that at time of sale, but the vendor collects and then remits the sales tax, etc.) in that it may appear (or even claim to be serving the public’s interest when it’s not really.
Clearly, this has gotten way too out of control with our airlines what with fortress hubs now making it all but impossible for new entrants to enter markets required to have any chance of being viable, much less successful such as DCA, LGA, JFK, EWR, LAX, SFO, etc.
Perhaps the best (shameful) example of this bs is Dallas Love Field where federal, state and local government levels have all conspired with private companies and kowtowed to their demands to cut gates from 32 or so to just 20, and then cap them at that level indefinitely.
And just to be sure they make that artificial constraint on gates stick, they tear down the original terminal so there’s no going back on that anytime soon.
Meanwhile, Southwest, by hook or crook, seeks to push out all of its (token) “competitors” like gangsters enforcing their control over street corners to run rackets or its many other lucrative “side businesses”.
How hypocritical and ironic is that when considering how the Goliaths tried to crush it like an unwanted cockroach when Herb Kelleher and Lamar Muse were seeking to launch that airline back in the day!
Anyhow, I’m just curious as to how private entities taking over ATC, and especially airport authorities, will be any better what with their even less accountability via FOIA/other “Sunshine Laws” that offer the public the potential to obtain records that public agencies at least could be compelled to release.
Worse, still, is the business world’s propensity for secrecy, outright bribery, and other forms of corruption.
How exactly will this prevent fortress hubs or other forms of competition eliminating business “practices”?
I mean seriously, London’s major airports are privatized, and are things any better at Heathrow or Gatwick in terms of competion benefitting flyers?
Maybe for the airlines at those airports – but most definitely NOT flyers.
Just sayin’
As to the ever shrinking seats, pathetically small (kiddie sized) lavatories where passengers have reportedly gotten stuck inside (I’m average height & weight for a middle aged male and cannot pivot/turn around comfortably; and the sink, which is about the size of an iPhone XS, is useless – I would imagine all the more so for parents with a messy inflight diaper change they need to recover from…), and seat spacing between rows (aka “pitch”) I’m not buying the this has “nothing to do with a lack/absence of properly functioning competition”.
Especially when considering both academic textbooks that discuss the classic symptoms that have long been accepted truths of what criteria defines the behavior, attitudes, and most importantly, selling practices and business models of an entities, be they government run such as the Department of Motor Vehicles, public transportation agencies (or other entities such as AMTRAK), or of course, airport operations by local governments and/or “port authorities” as we have in New York and New Jersey – AND even more so, by private companies such as utilities, cable tv/internet, telephone companies, and increasingly since 2008 when Delta and Northwest began the final phase of industry consolidation with their competition killing merger, that was then followed by the United and Continental merger, Southwest taking over AirTran, legacy US Airways taking over legacy American, and most recently, Alaska Airlines killing off plucky Virgin America, that allowed it to eliminate a looming competitive threat by an airline that had a substantial order of new airplanes in the pipeline, and all while making things easier on the remaining airlines in the Oligopolists’ Cartel Club (especially on the lucrative transcon routes where my partner and the VP at the company he works at reported that last week’s JFK-SFO-JFK roundtrip in Delta’s Comfort+ ain’t nearly as good as it used to be when Virgin America was around – just as they lamented after their first post-Virgin America roundtrip back in late June).
That’s looking at things from the nerdy, bookworm’s perspective.
Now, for those too young to remember the days when movies could only be seen in either a cinema, or a drive in, instead of in the comfort of one’s home, or more recently, both one’s home and/or virtually anywhere on a cell phone or other portable device, and therefore only understand going to the movies where spacious stadium seating, complete with cupholders for drinks are the bare minimum in most places (let alone IMAX; digital projection; and whatever other advanced technology enhancements are used for marketing purposes) or when concession stands offer a wide array of snacks and goodies (some even very upscale) I’m offering a less nerdy example of how businesses that lack meaningful competition know they can get away with offering crappy products because they KNOW they can (get away with offering crap products since there are limited options – or something I’ll simply call “no choice, ‘choices’” where, sure, one might be able to drive across town to whatever other movie theather is showing the movie one plans to see, and even if that theater is owned by another company/brand, the overall experience is likely going to be largely the same:
– Same price of admission
– Same overpriced soda, candy & popcorn
– Same creaky, crappy, seats (some with years of gum stuck underneath), with little or no legroom, all densely packed on a gently sloping, sticky, soda slicked, floor.
Yeah, sure, some theaters were a little cleaner than others – but otherwise the price of admission was the same, and the seats were all equally densely packed in rows where if one had the misfortune of being stuck behind someone much taller than themself, or who was wearing a hat/cap/hoodie they refused to remove, they had to spend most of their time shifting side to side to see the screen.
Yep, it was basically a “FU – take it or leave it” – you want to see this movie? Well, then get in line to buy your ticket; then stand in line to get into the theater; buy our overpriced sodas, popcorn or candy; sit in our lackustre auditoriums complete with their densely packed seats on our sticky floors – or you won’t see the movie at all (until it ends up on broadcast network tv cut to ribbons with commericals, and even the lamest sex scenes and “offensive language” cut out).
Compare that with what movie theaters – no, make that multi-plexes – offer now that they faced either outright extinction via obsolescence or instead stepping up their products to meet the competitive threat posed by in-home/personal device viewing offering moviegoers (and couch potatoes) a compelling reason to go out to watch a movie in a more comfortable theater featuring spacious stadium seating, plus other amenties that might make staying home (or viewing it on the go using a portable device) less desirable.
Or let’s take another example, I suppose a great many people are too young to remember:
The wretched products that used to be turned out by our “Big 3” automobile companies, General Motors, Ford and Chrysler in the 1970s and at least the first half of the 1980s, when they ruled the roost and the foreign companies we now can choose from were either still in their infancy and their products were viewed as inferior or even dangerous and unsafe, or simply not allowed to sell their cars and trucks in the USA due to protectionist policies in effect during those eras.
Here again, and let’s also note they were generally referred to as the “Big 3” (there was also a fourth company for a while called American Motors Company, or AMC, which was perhaps best known for its “Gremlin” and “Pacer” models), because these automobile maunfacturers had predominant domestic market shares, they deliberately degraded their products (sound familiar?) so they would become prone to breaking down much sooner (than in the eras of the past when cars soldiered on for many years) to drive sales from shortened replacement cycles.
And just as our airlines (and their battalions of generously paid shills) have come up with benign sounding marketing terms/corporate-speak/pleasant sounding euphemisms, etc., such as “densification” (a term most consumers have little or no idea of what, exactly, that means or how it impacts them) or intentionally stripped down, a la carte pricing (a dishonest, deceitful, classic bait & switch fraud if ever there was one), so too, did our shameful, dishonest car companies come up with a nebulous term to confuse and obfuscate consumes and regulators to purse their fraud: “Planned Obsolescene” (aka intentionally degrading their products’ quality to make them obsolete after a certain amount of time in service or miles/distance traveled so one has to ditch it and buy a replacement).
Then, when times and tastes changed, not to mention an oil embargo or two (or three) arising from foreign policy and/or other middle eastern wars, nationlization of oil and petrochemicals in other countries, etc., and our Big 3’s crappy gas guzzlers became impractical to use not just due to the high cost of fuel, but originally, also because gas shortages led to hours long lines to fill the tank, followed by alternate day rationing (based on odd-even days of the month and certain odd-even digits on license plates) AND hours long lines at gas stations across the country, and most foreign produced cars offered far greater fuel economy than domestic models made by GM, Ford and Chrysler (AMC’s tended to be more fuel efficient; my parents bought at least one model!), our Big 3’s crappy gas guzzlers were shunned, and their “FU” cartel/oligopolist business model featuring intentionally, and badly, degraded gas guzzling vehicles from the era of cheap fuel and their crummy “Planned Obsolescence” engineering were sent into an economic tailspin that took them more than a decade to turn around and recover from.
Those of a certain age will easily recall what Ford “Pinto” references – or just about every Plymouth (Chrysler’s long ago discontinued division) model, but especially its “Duster” and instantly recognize how those models came to signify how terrible cars made in the USA during the 1970s and much of the 1980s used to be.
Indeed, just as flyers know United as “Untied”, AA as “Always Awful” or BA as “Bloody Awful” just to name a few well known nicknames commonly used to describe companies with products most experience as being bad, and offering little, if any real value added for the money paid, the car company Ford’s nickname was “Found on [the] Road Dead” (for their car or truck).
Fact is, COMPETITION MATTERS.
Where it exists, time and time again, be it our collective movie going experience, or the much better quality and even award winning cars and trucks now produced by our domestic car companies/brands (technically speaking Chysler is largely foreign owned), where there has been meaningful competition either in terms of parallell viewing options for movies, or direct industry competition by other companies, foreign or domestic, as with autos and trucks, where quality and value are determinative factors in consumer behavior (and hence success or failure of a product/company), consumers find they get more competively priced products featuring more value for their money…
…but when competition is desperately lacking (as with our current airline industry cartel/oligopolists have certainly made clear not withstanding its many outright lies, myths and other self serving falsehoods) they get crap, and treated like crap, too – just as moviegoers used to experience, or car/truck buyers used to experience in those eras when options were few, and those respective industries’ leaders knew they could get away with a “Screw You” approach featuring crappy theaters, and vehicles intentionally engineered to malfunction on ever shortening cycles…
…and just like the current crop of mostly crooks, criminals and charlatans running our airlines do in an era of limited (at best and only on a handful of the busiest routes) “competition”, but mostly in an industry that screams out just how desperately lacking meaningful competition has become for for most of us in recent years!
What we need most is either facilitation of new entrants by building new facilities and mandating they be offered ONLY to new companies – or failing that, regulatory intervention of some form that eliminates the patently obvious anti-competitive behavior and flat out abuses now commonly experienced by most consumers, and if that still fails, outright forced divestiture of assets into new companies.
It really won’t matter who runs the airports, or how inefficient ATC may be structured as it now is, if we don’t address one of the root causes of the problem now afflicting the airline sector of our nation’s economy:
The emergence of a cartel that has already become very successful and adept at implementing business models and predatory pricing strategies/practices that fit to a “t” virtually all of the criteria defined in every Econ 101 textbook under the chapters called “Cartels” and “Oligopolies”.
Tinkering at the margins on who runs the airports or who ultimately runs ATC accomplishes NOTHING if we continue to turn a blind eye to the desperate lack of competition afflicting our airlines.
Gary,
Is there a good independently reviewed database that shows the lowering prices?
Your article suggests that airline prices go down, and airlines say that often as well, but some say it’s not so, especially when adjusted for inflation.
https://www.bizjournals.com/bizjournals/blog/seat2B/2014/05/don-t-believe-the-airfare-spin-cost-to-travel-is.html
“… The real price of flying has risen sharply since the dawn of deregulation and far outpaces the inflation rate of the last 40 years. … “
Addendum:
Another nickname for Ford’s cars and trucks in the bad old, non-competive domestic auto industry’s days of yore:
“Fix Or Repair Daily”
My first car was a twice “hand me down” early 1970s Thunderbird first used by my dad, and then an older sister (who favored that expression every time that car broke down!).
@JW – I like Joe but I don’t buy his methodology, he’s looking at one route comparing the lowest published fare at one point in time to another point in time, and adding in not just fees for things like checked bags but for extra legroom seats and to make changes on a ticket, telephone booking, priority boarding.
There’s standard data on inflation-adjusted fares. It comes from the Bureau of Transportation Statistics.
@JW Even including fees for things that used to be included in the fare, in my experience most airfares are lower or at least on par after adjusting for inflation. The core issue with the perception of airfare costs increasing is many consumers having less disposable income, again after adjusting for inflation, in combination with fond memories (theirs or their parents’) of when airfares were genuinely more affordable (a smaller portion of disposable income) and the flying experience more pleasant or at least special.
“codesharing can increase competition by having more than one airline selling seats on the same aircraft” That seems really counter intuitive. If 4 airlines can sell seats on the same plane, why would they take the chance of adding service themselves?
If we look at the larger example of code-sharing now common across the most heavily trafficked routes between the EU and the USA or the USA and some countries in Asia, more often than not what we now find are entire countries and their biggesti cities, key financial/industrial centers, and/or government capitals (e.g., London, Paris, Frankfurt, Munich, Amsterdam, Brussels, Zurich, etc.) on one side of the pond, plus the hubs the big 3 oligopolists on the USA/North America side largely carved up into fiefdoms with fortress hubs that are all but a lock on the local, country (EU side) and regional markets that the airlines dominate on either side.
For example, if one is heading to Frankfurt, they’re likely to find the Star Alliance carriers Lufthansa, United, or maybe Air Canada, offering an overwhelming number of options compared to either oneworld or SkyTeam carriers on most key nonstops connecting major cities on either continent.
Ditto applies to Paris or Amsterdam, except of course, to those cities and countries it’s SkyTeam – and slim pickings for nonstops on other airlines not in that alliance.
Or of course, London, where until Norwegian began siphoning off enough passengers to become a force British Airways is desperate to see either fail outright or take over itself to kill off the first competitor to emerge since Virgin Atlantic replaced Freddie Laker’s Skytrain, British Caledonian (BCal), or even PeopleExpress’ brief foray into the trans-Atlantic market 30 or so years ago, it’s basically been a duopoly between oneworld carriers “Always Awful” + “Bloody Awful” “or” more recently Delta + Virgin Atlantic after the former bought as much of the latter’s equity as EU laws allow (49.9%) from Singapore Airlines so Delta could finally pursue its ambition to become the largest business traveler oriented airline in the greater NYC market.
Heading across the Pacific, United’s anti-trust immunized alliance and code share operations with Japan’s All Nippon Airways (ANA) is so predominant that Delta has all but dismantled the decades long 5th Freedom hub at Tokyo/Narita it inherited when it merged with Northwest, and now operates as vastly reduced schedule to/from Tokyo, while American Airlines, even with its own anti-trust immunized alliance and code share operations with Japan Airlines, is struggling to make its own Tokyo operations successful, and has indeed announced it, too, is cutting back frequencies to/from Tokyo from an O&D market even as huge as Chicago, not to mention its own huge hub at Chicago/O’Hare.
Gone, too, are both Delta’s and American’s JFK-Tokyo nonstops in this era of code-shares or their even worse evil twin, anti-trust immunized alliances that allows former competitors to instead coordinate schedules, frequencies, aircraft guage (capacities/size), and of course, fares.
Who needs “winking and nodding” or “coded threats” expressed in computer loaded fare codes or during quarterly analyst calls where its become obligatory to “compete” over who CUTS capacity more (“capacity DISCIPLINE”) and who CUTS, or degrades, legroom, seat size, lavatories, etc., its products “better” and gets away with it (Delta is tops in that department!).
So, who still thinks “code-shares” and/or (worse still) anti-trust immunized alliances also featuring code-shares, are anything but cons that defraud consumers of choices and competition that might actually result in better service and truly lower fares (instead of the bs illusion of low fares that are never available on the dates when one prefers to travel, or come disguised as Trojan Horse junk/garbage “bait & switch” airfares with names like Basic Economy, which is really nothing more than a new name slapped on the same shams that used to be called “3rd Class” by railroads that did things like rip out seats to create SRO fares or even ripped out roofs from their rail cars (carriages) to make conditions so bad to drive “upsells” to 2nd class or 1st class.
If this sleazy and predatory behavior practiced by railroads in a bygone era all sounds eerily, even uncannily, familiar to what most flyers encounter today – it should.
Because no matter what mumbo jumbo the grossly overpaid shills say, or the misguided sycophants who somehow seem to have an intense masochistic streak where they must enjoy the pain and abuse they experience when they fly so much they want even more the next time around who seem to think the successive product degradations are what they “deserve” in exchange for a mythical low fare, the fact remains now as it always has been:
COMPETITION OFFERS MORE AND BETTER FOR CONSUMERS…
…while an absence of competition leads to much worse products and services at much higher, and artificially inflated prices that deliver little or no added value.
Sounds just like our oligopolist airlines and their cozy cartel featuring their price-fixing, capacity “disciplined”, “code shares”
…Rrrrrrrrrriiiiiiiiigggghhht?!?!?!
Wow! How the “eff” did we allow ourselves to fall for such a spectacularly bad con?
Maybe it’s time to rethink all of this anti-competitve bs that bascially amounts to government sanctioned theft – or a reverse Robin Hood “greed tax” levied by those who control an industry where you, me, or the next Bill Gates or Steve Jobs simply cannot set up shop in our garages and someday hope to offer something better…
Before deregulation a coach ticket from NY to LA was around $1200 in today’s dollars. You can find many first class tickets on the same route today for less than $1200. Deregulation was the best thing to happen to air travel. If you want more space buy a first class ticket – it’s cheper than a coach seat pre-deregulation.
You were vocal against rules that prohibited airlines to incarcerate old people and babies at will to whatever length they wanted during “tarmac” delays. You predicted a host of awful things would happen if these regulations passed, including sky-high cancellations.
Well, they thankfully did and you were wrong.
You are wrong now too. Too much religion, too little facts. Have you ever looked at the efficiency of air traffic control in Europe? Russia? Africa? China? The U.S. is one of the world’s most efficient system.
Seat size regulations would make a huge difference, like any rules that set the lowest common denominator for products in any industry (for example the flammability of children’s clothing) so that no competitor can get a lower cost (for example, by saving on flame retardants on children’s clothing).
Jake is 100% correct. There is a difference between government dictated prices and controls (which are a huge fail everywhere) and minimum safety standards which save lives. Seat pitch and width mandates would result in price increases (fewer seats on planes) but happier customers. There are plenty of other ways to differentiate your product as WN has profitably demonstrated.
There is plenty of ATC capacity in the existing system. The problem is underutilization of secondary airports. Again an easy fix by adjusting fees.
All of this would already be done if it were not for the crony capitalism that pervades DC.
I find it interesting that Delta is investing in their product, seemingly having foresaw that consumers will be able to see they have a better product, and will pay some amount for it. Is this another reason AA is circling the drain? And perhaps this is the reason that most AA employees hate AA and their customers–it must be embarrassing to know you’re offering such a inferior product to an airline that you once competed with, and instead your comparables are Spirit/Frontier/Allegiant in soft/hard product.