American Airlines, Southwest, and major unions (especially pilot unions) have lobbied the federal government to put upstart Dallas-based competitor JSX out of business. They want the federal government to change regulations to make the business model that lets JSX fly 30 seat planes out of private terminals, with co-pilots that have fewer than 1,500 hours of flying, illegal.
JSX’s business model is perfectly legal and consistent with 30 years of regulatory practice. There’s also no data, evidence or anecdote suggesting concerns over safety. But that doesn’t stop advocates of the status quo in aviation from lobbying to shut them down.
Nobel laureate economist George Stigler laid out “regulatory capture,” as “the problem of discovering when and why [the biggest companies in an] industry…use the state for its purposes”. While many consumers want regulation to benefit them, regulation usually winds up benefiting incumbent businesses, protecting them from upstart competitors.
After the American Airlines earnings call on Thursday, when senior management met with employees and took their questions, the very last question of the session was about the airline’s campaign to ban JSX. It was striking to me how clear both CEO Robert Isom and the airline’s head of government relations were that this was about shutting down a competitor – commercial concerns – and not a broader concern over ‘safety’ (which has been used publicly as a fig leaf).
When asked the question, CEO Isom joked “Ok we’re picking all the right topics today.” He’d just been pressed on the flight attendants union contract, on reservations and customer service pay, and even Hamas terrorism.
Answer about American’s lobbying campaign, he said that “we will take on all competitors, plain and simple.” But then he went on to explain where that isn’t actually the case – and they prefer to compete by lobbying the government so that they do not have to.
The one place where I do draw an issue with, where the rules aren’t the same. If you don’t have to deal with the same DOT provisions, the same FAA provisions, the same security TSA provisions that’s not fair….
We speak up when we have to. We’ve filed out comments on the review that the FAA is doing. And I’m quite certain that the FAA, the DOT, and TSA will take a look at what’s going on and make sure that no one is advantaged, and no one is allowed to operate outside the guidelines of and the intent and spirit of the rules that they set up. It’s pretty important for us to stand up when we need to.
Nate Gatten, who is American’s Chief Government Affairs Officer, said:
One of these companies actually advertises itself as a travel hack, and this mindset permeates its entire business model which Robert mentioned is really built on having different pilot requirements, having different security requirements, and that’s what we’re trying to head off.
It’s fairly clear that they see this as a commercial dispute, that American Airlines doesn’t think they should have to compete with JSX which operates 30 seat regional jets from Love Field in Dallas. JSX offers a better product, and American would like to put them out of business by turning off the pipeline they have to pilot talent and by banning their use of private terminals.
American talks about it in terms of ‘unfair competition’ – but that’s what anti-trust rules are about (they just lost a big anti-trust case) and the focus there is supposed to be for benefit of the consumer. Instead want regulations that require everything to be the same, just like an old Soviet supermarket with no choices and long lines (their advocacy is that passengers should go to the state commissary and get served the same stale product) which is not what these regulations were designed for.
Flying JSX is like Boris Yeltsin going to a US supermarket and seeing what was possible.
Yeltsin was then a member of the Supreme Soviet of the Soviet Union and one of the co-chairmen of the just-formed pro-reform faction of the Congress of People’s Deputies. And when he experienced Randall’s in Texas he “roamed the aisles..nodding his head in amazement.” He “told his fellow Russians in his entourage that if their people, who often must wait in line for most goods, saw the conditions of U.S. supermarkets, ‘there would be a revolution.'”
Next time you’re in a shitty supermarket hating your life remember this photo of Yeltsin experiencing a random American grocery store for the first time. pic.twitter.com/DQrSJmyKcl
— Slava Akhmechet (@spakhm) September 29, 2023
American Airlines is afraid that customers will like JSX’s product better and choose to fly them instead. JSX is based out of American’s home city, and on routes where they overlap offers a better experience than American Airlines first class, often for less money. American, of course, could get its own part 135 operating certificate and retrofit its stored Embraer E-140/145 jets with 30 seats. The biggest challenge they’d face is opposition from their pilot union. But it’s essentially what they did when upstart Legend Airlines began flying all-business class jets from Love Field two decades ago, basing their own all-business planes at the airport while suing to put them out of business. As soon as Legend failed, American ceased the service.
While American suggests that their commercial interest at least aligns with safety interests – Nate Gatten says – “we are joined in this view by nearly major aviation union and every significant safety advocate in the country in wanting to take a closer look at this model” – in fact a search of the FAAs regulatory docket doesn’t reveal a single comment from a safety organization supporting the changes that American Airlines wants – and I searched extensively for specific organizations as well as generically for (even astroturf, i.e. made up) organizations with Air Safety, Aviation Safety, Safe and Safety in their name.
If anyone can find one from an actual aviation safety organization making a data-driven common on the docket about part 135 operations, I’d appreciate your sharing it.
Gatten is correct, of course, that there is union solidarity in protecting incumbent carriers from competition. New entrants competing down profits makes gains through collective bargaining at those entrenched airlines harder.
JSX, for its part, was able to mobilize a record number of consumers to comment on a DOT regulation.
There are real aviation safety concerns in the U.S. There have been too many near-misses this year, air traffic control is understaffed and technology lags, and the FAA’s air traffic organization leadership has failed to prioritize things like remote towers that would help.
American Airlines distracting regulators with fake safety concerns is, itself, a threat to air safety.