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Friday, February 22, 2013

Study: Airline Fares Are Not Cheaper Than They Would Have Been Under Regulation

Posted by on Fri, Feb 22, 2013 at 7:38 PM

So many  flights. None of them mine.
  • Goldy | The Stranger
  • So many flights. None of them mine.

I'm stuck at O'Hare in a perpetual three-hour layover. Every time we seem to move a little closer to departure, they move the departure time a little further away. And that is on top of the hour delay on our first segment. It's Sisyphean.

To be clear, had I been late for my flight I'd be out the price of the ticket (or at the very least, a $150 change fee). But American Airlines is actually under no legal obligation to get us where we're going in any time frame remotely close to what we purchased. If they don't get us out tonight, they'll get us out tomorrow. Maybe. If they find some room on another flight. Or whenever.

Air travel doesn't have to be this way. Nor was it always.

Yeah, I know: Flying is so much cheaper now than it was in the days of regulation. So I should quit my whining. But while this conventional wisdom is true, it does not necessarily mean that commercial air travel is cheaper today than it would have been had the regulatory regime continued. Indeed, according to a 2007 study, inflation-adjusted airline fares have actually fallen less steeply since deregulation than they had during the 30 years prior.

This paper makes clear that the grant of pricing freedom to the airline industry has generally resulted in average prices being higher than they would have been had regulation continued under the DPFI rate-setting policies.

Airline fares were never static. The maximum fare was determined by a complex regulatory formula that took into account a variety of factors and capped profits at a reasonable return on investment. Given the productivity gains the industry has seen, most travelers would have seen fares fall faster under the old regulations than in the good old free market. And by far the largest impact on productivity is the size of the plane, an evolution that would have likely occurred with or without deregulation.

Also, the regulatory regime was not set in stone. The fare-setting formula and other rules could have, and likely would have been adjusted to deal with changing industry realities. While we can't know that fares would have continued to fall as they had during the 30 years prior to deregulation, we've got no reason to suppose that they wouldn't have.

And under the old regulatory regime, I'd probably be well on my way home by now, as AA would have just rebooked me on the next flight to Seattle—whatever the airline—not the next AA flight... of which there isn't any tonight.

And that would make "unavoidable" delays like this a bit more avoidable.

 

Comments (34) RSS

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1
It's so easy to get used to the parts of society that don't work properly and forget that there could be a better way. While some see you as a gadfly, Goldy, I appreciate your calls for a world that makes more sense.
Posted by crasher on February 22, 2013 at 8:04 PM · Report this
2
Airplanes have become buses with wings.
Posted by Dod on February 22, 2013 at 8:20 PM · Report this
3
Fun fact: running an airline is a highly complicated process, involving billions of dollars of capital equipment, being responsible for hundreds of lives per flight, a deep understanding of meteorological patterns, and hopefully being able to stay in business despite all of the above.

Being a blogger-cum-journalist involves bitching about minor unpleasantnesses in life.

Seriously, the vast majority of the Slog readership wasn't alive back during US airline regulation. Claiming we should go back to it is the sort of magical Knute Berger-type thinking where Seattle would be great if it was still 1978 and all those pesky new people didn't live here.

I'm sorry Goldy is having a shitty vacation, but this is really just a stupid rationalization of a post.
Posted by Tyler Pierce on February 22, 2013 at 8:27 PM · Report this
4
The airfare drop during deregulation is mostly accounted for low kerosene prices during the post mid-1980's oil glut. Now that the price of crude is up, it's a different story.
Posted by anon1256 on February 22, 2013 at 8:47 PM · Report this
5
Yeah, and as pointed out above, it isn't as if nearly every airline has had to file for bankruptcy protection or needed direct subsidies in order to make a profit (year after year). They are so smart with money and logistics and planning that they expand their own airports, increase their profits, pay their employees at above inflation levels, and generally are considered a safe investment by everyone. They don't bash unions, overpay their executives, cut service whenever not prohibited by law and in general are taught at MBA schools nationwide as a model of corporate competence.

Oh, wait....
Posted by abject funk on February 22, 2013 at 8:58 PM · Report this
Goldy 6
@3 Good free market monkey. Good monkey.

If the airline industry was a government agency, everybody would be outraged at the way it is run. But Capitalism! Yay!

(And yes, we're still at O'Hare.)
Posted by Goldy on February 22, 2013 at 8:58 PM · Report this
Sargon Bighorn 7
It's still the fastest way to get from here to there. Even with the delays.
Posted by Sargon Bighorn on February 22, 2013 at 9:06 PM · Report this
8
Sorry u are stuck at O'Hare. I spent a night at Logan this past summer,along with a few hundred others. Ick!
Posted by pat L on February 22, 2013 at 9:09 PM · Report this
9
@6 Gotta remember that one, said very soothingly, "Good free market monkey. Good monkey."
Posted by cracked on February 22, 2013 at 9:19 PM · Report this
10
"Given the productivity gains the industry has seen, most travelers would have seen fares fall faster under the old regulations than in the good old free market. "

Yes, because everyone knows how much productivity increases when you have a government supported monopoly. Those productivity gains were made because of market pressure.

By the way Goldensteinemberg, holidays are more fun with family. Shame yours told you to fuck off. Enjoy your loneliness Fat boy, I'm going to put the kid to bed.
Posted by Mercer Island Goy on February 22, 2013 at 9:31 PM · Report this
11
Good to hear your rants again, Goldy! I was wondering where you were.

Six years ago, I would have said that reregulation was impossible. The plutocracy has bought too much of the political system. Today, however, it seems like folks are as skeptical of Big Business as they are of Big Government, particularly since Big Business has screwed them longer and harder than Big Government ever could. So it's still a difficult proposition, but it may not be impossible.
Posted by floater on February 22, 2013 at 9:36 PM · Report this
12
@7 not always. Takes me 6 hrs at a reasonable pace to drive from Cleveland to L'ville. To fly I have to go from Cleveland to Chicago and then to L'ville. Follow the recommended "arrive 2 hrs before your flight advice" it works out to 2hrs + 1hr + a wait of an hour to two to change flights, then another hour to L'ville, plus an hour to get out of the airport and home, 6-7 hrs easy.

A train option would have been nice and we almost had it, but alas the 2010 swung bat shit crazy.

Sorry your stuck Goldy but remember Carter deregulated the airline industry. Reagan broke the air traffic controllers which I believe combined with the Union/Mob years of the 60s and 70s broke the back of the Labor Union. And there you are paying maybe 10-30% more then the old system or at least fewer and way more expensive direct flights between cities like Cleveland and L'ville - sitting in an airport waiting for a plane.

Posted by Machiavelli was framed on February 22, 2013 at 9:43 PM · Report this
seatackled 13
Aren't they still obligated to get you a room and issue food vouchers if the delay gets long enough?
Posted by seatackled on February 22, 2013 at 9:48 PM · Report this
Clara T 14
"I'm stuck at O'Hare in a perpetual three-hour layover. Every time we seem to move a little closer to departure, they move the departure time a little further away."

I hate this. They should just tell you the truth. Instead they boil you like a frog in the hope you won't notice.

In the end though it's pretty fucking amazing that we zing around the upper atmosphere in aluminum pipes, sipping beers and watching movies. Seems like hubris to bitch if the wifi's spotty ....
Posted by Clara T on February 22, 2013 at 10:36 PM · Report this
Simone 15
You should at least be demanding for food vouchers so you can get something from the airport food court Barf in the Box.

In 2011 I was stuck at JFK airport for a little over six hours due to a lightning storm. Luckily the plane had not taxied from the terminal so we had a choice of staying on the plane or going for a walk. I choose to take a walk and bought an overpriced bottle of something. I think it might have been some sort of juice. Flying to Turkey fyi.
Posted by Simone on February 22, 2013 at 11:44 PM · Report this
16
Goldy -

You can actually request to be rebooked if the delay is within the airline's control (mechanical, crew duty, etc.) No fee. Airlines were never responsible for 'force majeure' type events.
Posted by Action Slacks on February 23, 2013 at 12:07 AM · Report this
Supreme Ruler Of The Universe 17
I always fly Southwest and get the Web Special fares. I have never been late or bumped.

Southwest only fly 737s which streamlines and increases the quality of maintenance. They also hire smart commodities traders to buy fuel contracts and lock in low costs. Bags fly free. The website is excellent and I can get discounts on hotels and cars along with my trip.

Part of deregulation means having to shop and compare in a free market. I would say that I benefit from it by using a competitive airline like Southwest (I also recently enjoyed flying Alaska Air to Mexico, however Southwest is adding Mexican routes this year).
Posted by Supreme Ruler Of The Universe http://www.you-read-it-here-first.com on February 23, 2013 at 12:13 AM · Report this
18
@6 Yeah, I'm a free market monkey, in your ignorant classification. I'm also a Social Democrat and fly more in a month than you do in a year.

Seriously, you're complaining about how hard it is to do something that your grandparents could not even imagine. You had to wait a few hours? Awww. That must be hard. Maybe you could write a better plane? Oh, wait.

I actually love how The Stranger - and especially Goldy - like to rant about how there should be more STEM education, while having no experience or empathy for actual engineering. Airlines don't just happen, and some jackass blogger having to cool his heels in O'Hare isn't the end of the world.
Posted by Tyler Pierce on February 23, 2013 at 1:17 AM · Report this
19
Just think, if the airlines had been regulated this whole time and ticket prices were even lower than they are now, the airlines wouldn't be raking in all that gigantic and completely unjustifiable profi- oh wait
Posted by Reader01 on February 23, 2013 at 2:30 AM · Report this
TheMisanthrope 20
@18 is drunk. I couldn't follow that logic sober.

Because you're able to do something modern, you shouldn't complain about the companies screwing you over.

By that logic, because we have the Internet at all, we should be happy our Internet is slow and expensive compared to other countries because...free market? Engineers? Something about education?
Posted by TheMisanthrope on February 23, 2013 at 3:10 AM · Report this
Goldy 21
I'm home! And yeah, I have to admit that my flight wasn't as awful as that in the first 20 minutes of the movie Flight. So, yay! Praise be the unregulated free market!
Posted by Goldy on February 23, 2013 at 3:42 AM · Report this
22
Airfares really are not an unreasonable value. One-person cannot drive from Seattle to the East Coast and back for less than an advance purchase economy class airline ticket costs. And that's disregarding the time factor.

If there are lots of people traveling, andtime is irrelevant, then the economics may favor driving.
Posted by WestSeven on February 23, 2013 at 5:41 AM · Report this
23
The air travel sector is a poster child for laissez-faire capitalism. Deregulation was sold to the public as an increase in market competition when in fact it led to an oligopoly that swallowed dozens of regional and national airlines. It was billed for its efficiency and profitability, when actually despite defaulting on most of its pension engagements (the taxpayer picked up the tab), publicly funded infrastructure and a tiny kerosene tax, it has needed one bailout after another. etc ..
Posted by anon1256 on February 23, 2013 at 7:33 AM · Report this
24
@16 stop, that ruins Goldy's rant. Which is why he didn't mention the huge dump of snow that landed on half the Midwest Thursday/Friday.

http://www.dailymail.co.uk/news/article-…

http://www.foxnews.com/weather/2013/02/2…

Incidentally, this storm also meant that non-essential government services (including things like courts, and in many instances buses) also shut down in major cities. But apparently if government agencies acted this way people would be up in arms over... the weather. Only that didn't happen in the Midwest this week, because there people realize a foot and a half of snow means sometimes shit happens.

@17 The overwhelming majority of Southwest routes (the southwest, west coast, south) are to places that are comparably unaffected by inclement weather. That helps. A lot.

FWIW, the EU recently (2-5 years ago) passed a law that obliges airlines to give you a voucher for delays over three hours that aren't force majeure related. Result? I've had tons of delayed flights in Europe over the last year, but almost every single one of them was just under three hours!
Posted by Madasshatter on February 23, 2013 at 7:44 AM · Report this
BLUE 25
Goldy et al. are delusional beyond measure if they truly believe that a regulated industry would be regulated in their favor.

BTW, not a very well written paper and Goldy's simplification down to "fallen less steeply... the 30 years prior" is especially ridiculous. You may have missed it, but some other things changed over these same decades.
Posted by BLUE on February 23, 2013 at 8:46 AM · Report this
26
@25 yes, somehow Goldensteinemberg doesn't see the connection between those productivity increases over the past years and deregulation. I think Aeroflot circa 1991 is his model airline.
Posted by Mercer Island Goy on February 23, 2013 at 9:43 AM · Report this
Fnarf 27
So many things wrong with this post. Let me sum them up:

* even in regulation days weather delays would not have gotten you on another plane, a free room, or anything else. In fact, you are more likely to get the free room etc. today (if you kick and scream).

* regulation was designed to protect the airlines, not the passengers. It kept fares high, not low. The airlines made huge profits under regulation; now, despite what idiots like @5 think, they don't -- in fact, the airline industry as a whole has lost money since its inception.

* ticket prices are all about fuel costs, fuel costs, fuel costs. That's why they spend all that money on new aircraft that are more efficient.

* your central premise -- that, because airfares decreased by more during the regulation years than after, that means regulation would have lowered fares more than deregulation -- is laughably incoherent and illogical. It's just plain wrong. (Fuel costs, fuel costs, fuel costs).

Look, I get it -- you had an unpleasant layover in O'Hare. I have had numerous similar experiences (including a 24 hour delay in LAX, never acknowledged, but dribbled out two hours at a time, even though they KNEW the plane wouldn't be there for five or six, because it was coming, or not coming, rather, from New York -- a communications failure, not a regulatory one). But it is sad to see someone who has been alive as long as you have and yet still has no idea what is happening around him.
Posted by Fnarf http://www.facebook.com/fnarf on February 23, 2013 at 11:44 AM · Report this
eclexia 28
I flew quite a bit in the 90's, before e-tickets. With a paper ticket, you could walk up to any airline, tell them you were delayed on that carrier, and they would accept it. So yeah, the carry-on savvy traveler could escape a delayed flight like that. I don't know the arrangement that carriers had for ticket reimbursement.

I don't know that it was deregulation that killed this arrangement. I think it was that the carriers found that they didn't need to provide the option with e-tickets.

For a few years early in the e-ticket days, you could walk up to the desk and say "give me a paper ticket". The airlines hated doing that because they knew the customer was bailing. I think they might have weaseled out of that possibility.
Posted by eclexia on February 23, 2013 at 2:20 PM · Report this
Goldy 29
@27 Read the report. I provided a link. It's a lot more complicated than you make it out to be.

@24 I was not delayed due to weather in Chicago. By the time I got there, around 4:30pm, the delays had mostly worked their way out of the system, and the boards were largely showing on time flights. I was delayed because our aircraft left Ft. Myers, FL four hours late.
Posted by Goldy on February 23, 2013 at 3:04 PM · Report this
30
On average, airlines in the US profited 21 cents per passenger per flight last year.
Posted by boyd main on February 23, 2013 at 4:23 PM · Report this
31
Without reading the link, the intrinsic "quality" of Air Travel went down precipitously as well - price dropped because in 1963 when you flew, supermodels gave you handjobs while mistresses lit your cigars with $100 bills; by the mid-1980's we were in cramped rows and eating rehydrated cantaloupe. So of course the price fell faster in those years than in the past 30 years.
Posted by fetish on February 24, 2013 at 9:01 AM · Report this
32
Flying used to be great. People dressed up, the attendants were attractive, etc. Then the days came when everyone could fly. That's right, the bloated human garbage like Goldy who's body spills out of his Hawaiian shirt onto your seat and all the while complains about having to pay for a service while wiping crumbs of peanuts off his man boobs. Fuck him.
Posted by ExitOnly on February 24, 2013 at 6:58 PM · Report this
33
"30
On average, airlines in the US profited 21 cents per passenger per flight last year."

They're getting jew'd I guess.
Posted by Mercer Island Goy on February 25, 2013 at 2:55 PM · Report this
34
"30
On average, airlines in the US profited 21 cents per passenger per flight last year."

They're getting jew'd I guess.
Posted by Mercer Island Goy on February 25, 2013 at 2:56 PM · Report this

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