Frank Lorenzo, to many one of the most infamous men ever to run an airline, has written a book that comes out next week. It’s going to be a must-read that walks through his acquiring Continental, Eastern and more; selling the Eastern Airlines Shuttle to Donald Trump; and eventually being ruled by DOT to be unfit to run an airline.
He has an op-ed in the Wall Street Journal which content that Department of Transportation regulation activity coming out of the Biden administration is undermining what’s been a miracle of deregulation – he doesn’t cite all of the specifics, but it’s made air travel far more accessible to the general public with lower fares and far more flights (by one measure, seven times as many).
The meat of Lorenzo’s argument is this: airlines are forced to comply with more stringent rules than exist for other industries.
Thanks to the Transportation Department, airlines face online sales requirements that don’t apply to other retailers. Carriers must disclose fees for bags, flight changes, and cancellations on the first webpage where they quote a fare for a flight. Six airlines are suing to block the rule—“no fees” Southwest Airlines isn’t among them. An appeals court blocked this rule in late July because it exceeds the department’s statutory authority.
This higher standard is hard to defend. Should Amazon be required to show shipping costs on every item-description page?
Leaving aside that Amazon does, in fact, display shipping costs on item description pages, stricter federal regulation of airlines than exists for other industries is part and parcel of the design of the Airline Deregulation Act rather than undermining it.
Whether the specific rules at issue are consistent with DOT authority is another matter, but claiming that (1) DOT regulation itself undermines deregulation and that (2) airlines shouldn’t face stricter federal scrutiny are both incorrect.
- The Airline Deregulation Act pre-empts state regulation, which other businesses face.
- That’s been interpreted by the Supreme Court to even pre-empt common law contract claims such as duty of good faith and fair dealing.
- Since you can’t sue airlines for bad conduct around their pricing, and state agencies can’t regulate them for it, DOT has to figure out and enforce appropriate standards.
I happen to agree that there are several elements of the most recent DOT fee regulation, currently in litigation, that are ill-advised. I don’t think selecting specific fees and requiring their display along with schedule and price wherever those are offered is a great idea. For the most part, customers know there are fees and can easily find them. They hate checked bag fees, for instance, because they are aware of checked bag fees not because they’re a surprise. Meanwhile it’s more information to sort through in an already complicated booking process and it sets in stone the specific information everyone must see to buy a ticket – even as fees and services evolve.
I do wish we had better airline selling. I’d rather have displays about availability and quality of inflight wifi! Whether a meal will be served or is available for purchase (and what sort of quality). Or any number of other things that might be relevant to consumers, rather than fixing what information ought to matter to everyone. If checked bag fees must be displayed, why not also require display of on-time and completion data to help customers make informed choices? Why not require inclusion of mishandled bag data? Let’s compete over the right things!
Lorenzo goes on to list other rules airlines face that are unnecessarily costly and meddlesome and likely don’t have the positive gains they appear. But the solution isn’t simply do not regulate at the same time you hand airlines a liability shield. That feature of the Deregulation Act, extended by the Supreme Court to protect carriers from common law claims, needs to be revisited as well.
Also underdeveloped here – which would make Lorenzo’s broader point stronger – is that much of what remains wrong in the airline industry is the result of government control and direct provision of services.
- Airports are owned by governments in the U.S. (in much of the world they aren’t). They’re often subject to regulatory capture by their major airline tenants. As a result they provide poor service and frequently block competition (Atlanta is a perfect example of making life difficult for competitors to Delta).
- Security is usually performed directly by the government, far from a best practice worldwide. You get better security when a regulatory agency monitors a provider rather than overseeing themselves.
- Air traffic control is directly provided by the federal government. It’s more costly and with inferior technology to places like Canada. NavCanada – which manages not just Canadian traffic but also crossings of the North Atlantic – doesn’t have to rely on the vagaries of annual congressional appropriations cycles. They can borrow for their capital needs. The result is congested airspace that drives up prices and limits competition.
- Government slot controls subsidize incumbent carriers and protect them from competition in the most lucrative markets. Congestion pricing would better allocate limited capacity and allow new entrants at the same time. Regardless there’s no reason to gift permanent property rights from taxpayers to airlines in the form of slots.
- Domestic ownership rules prevent foreign carrier competition. Ryanair and Singapore Airlines should be permitted to compete against U.S. airlines between U.S. cities, driving down fares on one end and competing with high service levels at the other.
These are just a few of the distortions governments impose that makes air travel worse. And because airlines remain among the most heavily regulated industries in the country, as soon as one innovates the captured bureaucracies respond to protect the status quo. Legend Airlines was a perfectly legal upstart regulated and sued into bankruptcy to protect both American Airlines and Southwest (ultimately Southwest gained a near total monopoly on Dallas Love Field and the Legend terminal was seized by the city – it’s now a Lincoln dealership).
Lorenzo is still alive?
That guy is rotten from his most inner core. Union buster.
And greedy individual, that goobled up great airlines in weak times only to run them into the ground costing many thousands of jobs
While he and the other Frank (Borman) walk away lining their pockets with millions.
Shame on all of them.
Hope his book is as big of a flop , as his corporate raider (mis)management style was.
There isn’t a hole deep enough for him.
Listening to Lorenzo lament about the woes of the industry he has been barred from, is like listening to Trump discuss honest business practices or Nixon talking about integrity in government officials — it won’t play.
Gary, You should take a poll. Who was the worst airline CEO. Frank Lorenzo, Carl Icahn, or Doug Parker?
Oh, I am sorry. Is someone displeased with the amount of regulation that his industry one of the most heavily subsidized industries in the country has to abide by basic regulations? Oh de humanity.
Frank…
Two questions…
1. Is trump related to you?
2. Since when did you start worrying about following rules?
Picard
I did consulting work for Texas Air while Frank was CEO. He, along with Bob Crandall, are 2 of the most visionary leaders the airline industry as ever had and we suffer by not having men like that lead the airlines today. The DOT banishment was purely political. Nothing wrong with breaking a union. Frank and Bob both detested unions and I don’t blame them. Much of what the airline industry has become is a testament to the vision and leadership of these 2 men. Articles like this and comments from people that either have no clue about the airline industry in the 80s and 90s or are simply union lackeys is pathetic.
I want all airlines to be heavily unionized and regulated, as much as possible, just to tick off this repulsive gremlin from the past and his still-active acolytes. Bring back the CAB, and bring the number of national carriers down to a manageable number. Four is sufficient. And restrict the repulsive B6 from flying anywhere west of Pittsburgh and anywhere east of Bangor, and I’m being very generous to them in that allocation.
while your and Frank Lorenzo’s theses both have merit, a number of your examples don’t:
1. ATC is less expensive in the US than in many other countries. It doesn’t work near as well here as it does elsewhere but the notion that Canada does better is true only if you exclude Toronto – the closest thing Canada has to an airport of the scale of ATL, JFK, ORD – and no Canadian city has multiple airports in the same metro area. Canada also has a whole lot more land per airplane departure than the US. And there are delays going over the Atlantic at times – and the US is often the first or last handoff in the US for transpacific flights.
2. The knee jerk reaction to nationalize security post 9/11 has not worked. Overseeing a private contractor is better for that role but there has to be a nationwide system. The TSA is hit or miss depending on the airport and the lane one is in.
3. Airports are owned locally in the US for the same reason why the United States is the United States… local governments have much more control of most of life than in other countries. The feds should not be telling local communities how and where they should build local infrastructure that affects huge parts of the community.
4. Feel free to cite specific examples of how DL has benefitted at ATL that other airlines have not benefitted from at other airports. And also list what non-DL airlines have not gotten because of ATL.
5. The slot control system is set up based on global conventions. Other airlines in other countries benefit the same way US airlines do here.
6. You ruin any sense of policy credibility when you suggest that foreign airlines should be able to fly within the US. There simply is nothing that any US company – airline or not – can gain in exchange for access to the US domestic market. And the notion that SQ or EK would offer similar service within the US to what they offer internationally is purely delusion.
I’m stunned that Lorenzo is still alive. I thought the miserable vermin would have been safely rotting in hell by now.
Unsurprisingly, many of his assertions are somewhere between half-truths to absolutely wrong.
Government ownership of airports is vital. For proof, just look at how passengers are getting soaked flying through Heathrow, which is privately owned. What a terrible mistake that was.
Outsourcing ATC and TSA is a huge gamble at best. Picture either group going on strike the week before Xmas.
One thing that’s absolutely correct is the need for landing slots to be auctioned off in rotation for 10 years. The greed and shortsightedness of the airlines has proven that they can’t be trusted to use the slots properly.
I read the article in the WSJ. I am going to buy the book and celebrate the entrepreneurship. The government creates strange distortions. The lack of a NavCanada-like ATC body also generates unnecessary carbon into the atmosphere because the descent of airplanes is staggered in the status quo instead of a continuous descent. It’s such a shame. I would describe the current scene as sclerotic. An obvious win-win still takes leadership, a place where again Secretary Mayor Pete disappoints in.
I wonder how many airlines Frank Lorenzo could have damaged or destroyed if he was able to continue in the airline industry. Some of the merger partners of the big three may have been in his sights.
Oh the horror that airlines be required to disclosed fees so consumers are fully informed about what they are agreeing to. Suggesting it’s better they be kept in the dark tells us pretty much everything we need to know about the man.
@AC – “Much of what the airline industry has become is a testament to the vision and leadership of these 2 men.”
Saying that straight has got me choking on my morning coffee. That is one of the funniest things I’ve read on here in a while, if you genuinely mean that unironically.
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Is he asking for repentance??
Not in my town which was directly hit with the fall of Texas International (old Tree Top AIrlines); Continental; and especially Eastern. Lots of good people found themselves out of a job due to Frank messing with his alchemy. He was eventually declared unfit to run an airline by the government.
Yet, he would be baying for blood if bumped for a higher paying PAX. You can’t have it both ways!!
Keep moving Frank, you’re not welcomed in my town!!!
In the 90s, I lived in a subdivision with a lot of former Eastern employees who were struggling with wonderful jobs such as asbestos removal in order to keep their homes. If any of them buy Lorenzo’s book, it will only to start a fire so they can burn him in effigy.
The sentence about Atlanta being a good example of a government airport concession to a single carrier is absolutely true. Delta is an oppressive monopoly in Atlanta. Its service is TERRIBLE. It is known for DIARRHEA, losing luggage, snarky FAs, and terrible pilots who couldn’t land softly to save their miserable lives. Lorenzo predicted the outcome of mis-guided regulation decades ago. He was right. Atlanta may be the largest airport in terms of passengers coming through it but not a damned one has a choice to NOT fly through that fetid cesspool.
“Ryanair and Singapore Airlines should be permitted to compete against U.S. airlines between U.S. cities”
Why do people always say this? This will NEVER happen, not because of US law but because it would be horrifically unprofitable.
F U Frank Lorenzo
It’s simple. Lorenzo totally bad guy. Hated by employees and everyone else who ever dealt with him. Bad then, bad now, don’t buy the book or help him market it.
Um, no, Amazon does not list the shipping cost on each item page. When you get to the order page, you are presented with a number of shipping options, each with a projected delivery date and cost, for the full order.(And items shipped directly by third parties are listed and priced separately.)
Amazon sometimes has the shipping and handling cost on the item page. Usually you have to go to the check out page to have it properly listed. A lot of variations in shipping can lead to a lot of different shipping costs.