Why Don't The Airlines Just Raise Fares?
- Thread starter FWAAA
- Start date
We'll see how the American public likes it when it costs $150 RT coast to coast, but $450 from Sioux City to Chicago . . . . . plus having to schlep their bags to another carrier and pay more to get where they really want to go . . . . and that's if any carriers even bother with serving hick towns that can't support a critical mass of passengers.
You can bet they'll be cries for re-regulation to force those mean, nasty airlines to serve them at below cost prices.
You can bet they'll be cries for re-regulation to force those mean, nasty airlines to serve them at below cost prices.
markkus757
Veteran
- Jul 26, 2004
- 598
- 1
Bob - the industry grew because the government allowed it to. Under the CAB, you had to apply for route authorization. Only two airlines could fly the route and they had strict rules about who could enter the market. The airlines didn't have to worry about service or costs because they were given a guaranteed amount of reutrn on their investment. As far as not letting US and UA merge, what would that have done? More people would be out of work than now. Did you ever hear of anti-trust? Should the government not step in in any circumstance? Why not just let everyone just go out of business. By the way, your customer is not the business man anymore. He flies directly to where he nneds to go and does not sweat hub delays or strikes either. He zips in and out in his fractional-leased jet. You do have the disney-slobs that do not know how to fly and wouldn't even travel if the fare wasn't dirt cheap. The market has changed. Has it passed you by?
markkus757,Dec 16 2004, 07:27 PM]
Bob - the industry grew because the government allowed it to.
Yes, and no. Under the CAB the industry did grow, in fact it grew at a greater rate than it has since deregulation. From 1940 to 1980 it grew by over 2000%.
Under the CAB, you had to apply for route authorization. Only two airlines could fly the route and they had strict rules about who could enter the market.
Ok, these conditions still exist in many International markets(which by the way are our most profitable).
The airlines didn't have to worry about service or costs because they were given a guaranteed amount of reutrn on their investment.
Wrong again. They were not guaranteed anything and airlines main focus was through better service because the rates were established within a minimum and maximum fare.Poorly managed airlines would dissappear, and many did, under deregulation. Costs were a concern as was service because as you stated two airlines would be granted route authority and they competed.
As far as not letting US and UA merge, what would that have done? More people would be out of work than now. Did you ever hear of anti-trust? Should the government not step in in any circumstance?
It just goes to show that the industry is only partially "deregulated" .
Would a merged UA/US have been an overwhelming combination? Would they have been able to dictate pricing? Apparently not, since those on your side of the arguement claim that it is the tiny LCCs that are dictating prices, not the giants right?
Why then did the government allow for the AA/TWA merger?
How was allowing the largest trunk airline to aquire another trunk carrier less of an antitrust issue than allowing the second largest trunk airline to aquire a regional carrier?
The answer to that lies with the unions, the AA merger was the combination of weak unions that were used to giving concessions while both UAL and USAIR had militant unions. A giant concessions machine was just what the industry, the banks, the FAA and the government wanted. And they got it with the TWA-AA merger.
"Deregulation" is just another lie, what it really was is "regulatory reform", that allowed the FAA and the heads of industry to pursue the FAAs mandate of providing the "availability of a variety of adequate, economic, efficient and low priced services".
As far as the government not stepping in under any circumstances I have not seen any where they stepped in on our behalf so I would say if they cant do it fairly they should not do it at all.
Why not just let everyone just go out of business.
You're being silly, there is a lot more at stake here than a couple of hundred thousand airline workers here. Do you really think that the industry would "go away"? What we need to do as workers is use our labor, or more important, the withdrawl of it to illustrate this to the rest of the economy.
By the way, your customer is not the business man anymore. He flies directly to where he nneds to go and does not sweat hub delays or strikes either. He zips in and out in his fractional-leased jet. You do have the disney-slobs that do not know how to fly and wouldn't even travel if the fare wasn't dirt cheap. The market has changed. Has it passed you by?
Why dont you ask FAAA that one? While some may use fractional-leases as an alternate means flying on a regular scheduled airline is still cheaper and more efficient. How many of these exist, a dozen, a hundred? There is a lot more demand for business travel than that, and just ask Susan St James about the merits of this new alternative.
If what you say is true then why arent they ripping out First and Business class seats?Why arent they all configuring their aircraft like SWA?
Bob - the industry grew because the government allowed it to.
Yes, and no. Under the CAB the industry did grow, in fact it grew at a greater rate than it has since deregulation. From 1940 to 1980 it grew by over 2000%.
Under the CAB, you had to apply for route authorization. Only two airlines could fly the route and they had strict rules about who could enter the market.
Ok, these conditions still exist in many International markets(which by the way are our most profitable).
The airlines didn't have to worry about service or costs because they were given a guaranteed amount of reutrn on their investment.
Wrong again. They were not guaranteed anything and airlines main focus was through better service because the rates were established within a minimum and maximum fare.Poorly managed airlines would dissappear, and many did, under deregulation. Costs were a concern as was service because as you stated two airlines would be granted route authority and they competed.
As far as not letting US and UA merge, what would that have done? More people would be out of work than now. Did you ever hear of anti-trust? Should the government not step in in any circumstance?
It just goes to show that the industry is only partially "deregulated" .
Would a merged UA/US have been an overwhelming combination? Would they have been able to dictate pricing? Apparently not, since those on your side of the arguement claim that it is the tiny LCCs that are dictating prices, not the giants right?
Why then did the government allow for the AA/TWA merger?
How was allowing the largest trunk airline to aquire another trunk carrier less of an antitrust issue than allowing the second largest trunk airline to aquire a regional carrier?
The answer to that lies with the unions, the AA merger was the combination of weak unions that were used to giving concessions while both UAL and USAIR had militant unions. A giant concessions machine was just what the industry, the banks, the FAA and the government wanted. And they got it with the TWA-AA merger.
"Deregulation" is just another lie, what it really was is "regulatory reform", that allowed the FAA and the heads of industry to pursue the FAAs mandate of providing the "availability of a variety of adequate, economic, efficient and low priced services".
As far as the government not stepping in under any circumstances I have not seen any where they stepped in on our behalf so I would say if they cant do it fairly they should not do it at all.
Why not just let everyone just go out of business.
You're being silly, there is a lot more at stake here than a couple of hundred thousand airline workers here. Do you really think that the industry would "go away"? What we need to do as workers is use our labor, or more important, the withdrawl of it to illustrate this to the rest of the economy.
By the way, your customer is not the business man anymore. He flies directly to where he nneds to go and does not sweat hub delays or strikes either. He zips in and out in his fractional-leased jet. You do have the disney-slobs that do not know how to fly and wouldn't even travel if the fare wasn't dirt cheap. The market has changed. Has it passed you by?
Why dont you ask FAAA that one? While some may use fractional-leases as an alternate means flying on a regular scheduled airline is still cheaper and more efficient. How many of these exist, a dozen, a hundred? There is a lot more demand for business travel than that, and just ask Susan St James about the merits of this new alternative.
If what you say is true then why arent they ripping out First and Business class seats?Why arent they all configuring their aircraft like SWA?
Former ModerAAtor said:
Do you mean as in the trades like Carpenters, Electricians, Plumbers and Construction workers?
The RLA does not "require" a closed shop. It allows it, and because it is a contract that falls under federal jurisdiction the closed shop provisions, if negotiated override state RTW laws.
The fact is that until very recently the APA was an "Open shop". They certainly did a lot better than any TWU represented member.
Ok, while the ability to negotiate closed shop provisions protects "the union" how does it protect "the members"? My post clearly seperated the two.
While in theory the union is the members thats not the case with the TWU. Its just rhetoric and the TWU has proved this in several lawsuits where they maintained that the unelected International, by virtue of the TWU Constitution has authority over the contract. The recent reductions at class II stations, which was conducted solely between the International and the company excluded elected local reps from participation is another clear example of this.
The assumtion is that the union is run by and for the members by people of their own choosing. Thats not the case with the AA/TWU where our International leaders are appointed by people that the members do not vote for. For workers such as myself, who live in high cost areas, the RLA provides no advantages. The imposed common affilaition and contract across widely varying living conditions puts us at a severe disadvantage. If we were under the NLRA the TWU would have been gone years ago, and that goes for all classes and crafts.
eolesen
Veteran
- Jul 23, 2003
- 15,940
- 9,371
Bob Owens said:
You 100% certain of that? The only exception to agency fee that I'm aware of over the past 10 years was for professional flight engineers, who were not represented by APA, but belonged to a separate union whose name escapes me at the moment...
Bob Owens said:
Goes beyond trade unions. Take a look at supermarket chains and any number of companies who have stores/plants in RTW states which are open shop and facilities in strong union states which require a closed shop.
markkus757
Veteran
- Jul 26, 2004
- 598
- 1
Bob - go ask how many full fare passengers and how many first class passengers still fly your airline. There over 1500 corporate jets on order right now. The biggest operators are fractional owner corps. Have seen the press release about Crandall getting back into the industry? He is getting the air taxi business going and it will be a big seller. When a jet can now go for under $2 million, you are going to have even more problems getting the higher yields to fly your airline.
I will predict right now that you will have more growth with Ted and Song in the future than the mainline carriers they represent. First class is being niched out of a lot of markets, whether it's a spinoff like the previously mentioned, or the regional carriers flying their barbies.
You were speaking about international routes. There is no comparison between domestic and international routes anymore and that will not change going forward in this industry.
AA was able to take what they wanted from TWA because they going to liquidate instead. If US or UA get that drastic, they might just let that combination go forward. Make no mistake though, casualties will be a reality as they get rid of any overlap, including support personnel.
As far as only being partial deregulated, what industry does not have some oversight by the government. The underlying problem still exists. Johnny, the "never flied before" passenger, saw the lowest fare online and doesn't care who is flying the airplane. They don't care who is fixing it, pushing it back, serving what for food, he saw it online for an amount that he can readily afford, and at a time that he can travel. Until those people stop pricing the majority of the markets, the airlines will not be able to raise fares significantly. We're not talking about going back to the overpricing tha DID exist in a lot of markets, we're talking about screens on the Computer Resvervations systems; getting to the first page is everything. Most people usually look for the cheapest button and don't even take the time to search page two. History will tell us how the industry will changing. We are all just making educated guesses for now.
I will predict right now that you will have more growth with Ted and Song in the future than the mainline carriers they represent. First class is being niched out of a lot of markets, whether it's a spinoff like the previously mentioned, or the regional carriers flying their barbies.
You were speaking about international routes. There is no comparison between domestic and international routes anymore and that will not change going forward in this industry.
AA was able to take what they wanted from TWA because they going to liquidate instead. If US or UA get that drastic, they might just let that combination go forward. Make no mistake though, casualties will be a reality as they get rid of any overlap, including support personnel.
As far as only being partial deregulated, what industry does not have some oversight by the government. The underlying problem still exists. Johnny, the "never flied before" passenger, saw the lowest fare online and doesn't care who is flying the airplane. They don't care who is fixing it, pushing it back, serving what for food, he saw it online for an amount that he can readily afford, and at a time that he can travel. Until those people stop pricing the majority of the markets, the airlines will not be able to raise fares significantly. We're not talking about going back to the overpricing tha DID exist in a lot of markets, we're talking about screens on the Computer Resvervations systems; getting to the first page is everything. Most people usually look for the cheapest button and don't even take the time to search page two. History will tell us how the industry will changing. We are all just making educated guesses for now.
Bob Owens:
Do you have a point anymore? At one point, you complained that pax booked on an airline that stops service are hosed. In the next response, you complain that this doesn't allow the free market to work. So what is your point? I think there should be some consumer-protection regulations. I'm not sure if this is the right way to do it, but there should be some sort of regulations... And these again exist in most industries. Movies have ratings. Retailers have scanner regulations and price notification regulations (where I live, all products must have a price clearly indicated on the shelf or on the product, and the consumer must be able to read the scanner read-out for each items as purchased).
I agree that the RLA is antiquated legislation that should be replaced. However, I am not sure of what the best replacement would be. I do think there is a better way, however. On this, we agree.
Now on to the "conclusion" bit... Whlinder has already noted the theoretical conclusion of competition... And the railroads are a good example of that. There is still competition, and all players make little, if any, profits. It can be argued that airline industry fits this bill as well. The current issue in the airline industry is that even though the industry is close to break even, but within the industry, their are clear winners and losers.
The oil industry... last time I checked, there were a couple of different gas stations near my house... so, I am certain that there is not a monopoly on distribution of gasoline to consumers. Yes, there are some monopolistic influences on oil production due to our friends at OPEC, but even so, OPEC is seeing more competition from Russia and other non-OPEC countries. However, some oil producers getting together to limit production of oil is hardly representative of the conclusion to competition in a free market.
While MicroSoft has a near monopoly in some sectors, its not pure. Last I checked, I could still buy products from Apple. At work (no college boy here), I still have access to UNIX based systems. So there is some competition. However, currently there is some monopolization on software. However, this seems to be more the result of a search for a standard, rather than result of competition.
I can't comment on NYC mass transit competition, because I only have a small amount of knowledge on the subject.
Next, you say that I will claim that cheaper competitors will underbid the more costly legacy airlines, and that my "free market theory" forgets the power of the legacies. I reply that the LCC's have successfully reduced the power of the legacies over the last 20 years, and you respond with an attack on economic theory and my grammer... Well, here's the deal. I understand that economic theory isn't perfect. However, there are basic principles of economic theory that shine through the imperfections... Like supply and demand. Changes in supply and demand do not create perfect responses. Some of this is explained through the elasticity theories, and some of it is simply consumer preference (for example for airplanes over trains on long distance travel). But that does not invalidate the supply and demand theory.
Lastly, I am not in school, and haven't been in several years. If I were writing a paper, or a book, or something for commercial publication, I'd edit it more throughly. Generally, I think my points generally come across as reasoned debate despite my occasional grammar or spellinng errors. I overlook others errors when their argument has merit. Get over it.
Do you have a point anymore? At one point, you complained that pax booked on an airline that stops service are hosed. In the next response, you complain that this doesn't allow the free market to work. So what is your point? I think there should be some consumer-protection regulations. I'm not sure if this is the right way to do it, but there should be some sort of regulations... And these again exist in most industries. Movies have ratings. Retailers have scanner regulations and price notification regulations (where I live, all products must have a price clearly indicated on the shelf or on the product, and the consumer must be able to read the scanner read-out for each items as purchased).
I agree that the RLA is antiquated legislation that should be replaced. However, I am not sure of what the best replacement would be. I do think there is a better way, however. On this, we agree.
Now on to the "conclusion" bit... Whlinder has already noted the theoretical conclusion of competition... And the railroads are a good example of that. There is still competition, and all players make little, if any, profits. It can be argued that airline industry fits this bill as well. The current issue in the airline industry is that even though the industry is close to break even, but within the industry, their are clear winners and losers.
The oil industry... last time I checked, there were a couple of different gas stations near my house... so, I am certain that there is not a monopoly on distribution of gasoline to consumers. Yes, there are some monopolistic influences on oil production due to our friends at OPEC, but even so, OPEC is seeing more competition from Russia and other non-OPEC countries. However, some oil producers getting together to limit production of oil is hardly representative of the conclusion to competition in a free market.
While MicroSoft has a near monopoly in some sectors, its not pure. Last I checked, I could still buy products from Apple. At work (no college boy here), I still have access to UNIX based systems. So there is some competition. However, currently there is some monopolization on software. However, this seems to be more the result of a search for a standard, rather than result of competition.
I can't comment on NYC mass transit competition, because I only have a small amount of knowledge on the subject.
Next, you say that I will claim that cheaper competitors will underbid the more costly legacy airlines, and that my "free market theory" forgets the power of the legacies. I reply that the LCC's have successfully reduced the power of the legacies over the last 20 years, and you respond with an attack on economic theory and my grammer... Well, here's the deal. I understand that economic theory isn't perfect. However, there are basic principles of economic theory that shine through the imperfections... Like supply and demand. Changes in supply and demand do not create perfect responses. Some of this is explained through the elasticity theories, and some of it is simply consumer preference (for example for airplanes over trains on long distance travel). But that does not invalidate the supply and demand theory.
Lastly, I am not in school, and haven't been in several years. If I were writing a paper, or a book, or something for commercial publication, I'd edit it more throughly. Generally, I think my points generally come across as reasoned debate despite my occasional grammar or spellinng errors. I overlook others errors when their argument has merit. Get over it.
