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"Don't Feel Sorry for the Airlines"

Mar 17, 2020, 3:21 PM

I'm going to guess that the author and I disagree on more things political than we agree on, but I've gotta give him a high five on this one. I'm on board with 95% of this piece....you want assistance, stop milking us for every dime while not giving a tin #$%^ about the customer experience.

Link included, and I'm C&P'ing in case it's stuck behind paywall.

https://www.nytimes.com/2020/03/16/opinion/airlines-bailout.html

Opinion | Don’t Feel Sorry for the Airlines

Before providing them any assistance, we must demand that they change how they treat their customers and employees.

Opinion | Don’t Feel Sorry for the Airlines

Before providing them any assistance, we must demand that they change how they treat their customers and employees.

For American Airlines, the nation’s largest airline, the mid to late 2010s were what the Bible calls “years of plenty.”

In 2014, having reduced competition through mergers and raised billions of dollars in new baggage-fee revenue, American began reaching stunning levels of financial success. In 2015, it posted a $7.6 billion profit — compared, for example, to profits of about $500 million in 2007 and less than $250 million in 2006. It would continue to earn billions in profit annually for the rest of the decade. “I don’t think we’re ever going to lose money again,” the company’s chief executive, Doug Parker, said in 2017.

There are plenty of things American could have done with all that money. It could have stored up its cash reserves for a future crisis, knowing that airlines regularly cycle through booms and busts. It might have tried to decisively settle its continuing contract disputes with pilots, flight attendants and mechanics. It might have invested heavily in better service quality to try to repair its longstanding reputation as the worst of the major carriers.

Instead, American blew most of its cash on a stock buyback spree. From 2014 to 2020, in an attempt to increase its earnings per share, American spent more than $15 billion buying back its own stock. It managed, despite the risk of the proverbial rainy day, to shrink its cash reserves. At the same time it was blowing cash on buybacks, American also began to borrow heavily to finance the purchase of new planes and the retrofitting of old planes to pack in more seats. As early as 2017 analysts warned of a risk of default should the economy deteriorate, but American kept borrowing. It has now accumulated a debt of nearly $30 billion, nearly five times the company’s current market value.

At no time during its years of plenty did American improve how it treats its customers. Change fees went up to $200 for domestic flights and to $750 for international. Its widely despised baggage fees were hiked to $30 and $40 for first and second bags. These higher fees yielded billions of dollars, yet did not help the airline improve its on-time arrivals, reduce tarmac delays or prevent involuntary bumping. Instead, American’s main “innovations” were the removal of screens from its planes, the reduction of bathroom and seat sizes and the introduction of a “basic economy” class that initially included a ban on carry-on luggage.

In the wake of the coronavirus outbreak, which is wreaking havoc on the airline industry, American Airlines has not yet asked for a bailout — at least not in so many words. Yet after a recent meeting with airline leadership, Larry Kudlow, the director of the National Economic Council, said that “certain sectors of the economy, airlines coming to mind” might require assistance. Treasury Secretary Steven Mnuchin said Wednesday that the airlines, including American, would be “on the top of the list” for federal loan relief.

As the government considers what we, the public, should do for the airlines, we should ask, Just what have they done for us?

The United States economy needs an airline industry to function. The industry is in that sense not a “normal” industry, but rather what was once called a common carrier or a public utility: a critical infrastructure on which the rest of the economy relies. The major airlines know that unlike a local restaurant, they will never be allowed, collectively, to fail completely. In practice, the public has subsidized the industry by providing de facto insurance against hard times in the form of bailouts or merger approvals. And now here we go again.

We cannot permit American and other airlines to use federal assistance, whether labeled a bailout or not, to weather the coronavirus crisis and then return to business as usual. Before providing any loan relief, tax breaks or cash transfers, we must demand that the airlines change how they treat their customers and employees and make basic changes in industry ownership structure.

Beginning with passengers, change fees should be capped at $50 and baggage fees tied to some ratio of costs. The change fees don’t just irritate; they are also a drag on the broader economy, making the transport system less flexible and discouraging what would otherwise be efficient changes to travel plans. We should also put an end to the airlines’ pursuit of smaller and smaller seats, which are not only uncomfortable and even physically harmful, but also foster in-flight rage and make the job of flight attendants nigh unbearable. Finally, we have allowed too much common ownership, permitting large shareholders to take a stake in each of the major airlines, creating incentives to collude instead of compete.

The airlines will argue that their ownership structure, cramped seats, high fees and other forms of customer suffering are necessary to keep prices lower. But after the last decade’s mergers, no one should take that argument seriously. As any economist will tell you, in a market with reduced competition, and common ownership, there is limited pressure to reduce prices. Instead, as we’ve seen, the major airlines charge what they can get away with and spend the profit on stock buybacks and other self-serving enterprises.

The question of what the public should demand from an airline bailout raises questions that transcend the business of flying. The next several weeks will leave behind many economic victims, including nearly every provider of in-person services. Many small retailers, restaurants and other businesses, like caterers or fitness instructors, face grim prospects. Yet it is the economy’s big players, like banks and airlines, that are the best at asking for (and getting) government assistance.

During the last economic crisis, we largely let individuals suffer while helping out the big guys, leaving behind deep resentments that still fester. This time around we should start from the bottom instead of the top.

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bailouts in the middle of the 1900s. While Ford, GM and foreign automaker researched and developed lighter autobodies and engines which produced less and cleaner emissions Chrysler cruised along without changing anything much.

In efforts to produce an automobile comparable to rice burners Ford and Chevy produced the Pinto and Vega respectively. To repair the damage Chrysler management did to their corporate bosses the government bailed them out and gave them R&D from the other two major US auto producers.

Harley got a chuck if change and upped taxes on Honda and other two wheeled rice burners. Both companies were rewarded for bad behavior which sent a message to huge companies that the taxpayer was there if they got themselves into a pickle with bad behavior.

Like it or not it's SOP for the US now. If I remember, Ford refused help when it got into trouble intending that government not be involved in day to day company decisions.

I don't know about anything like that happening before.

"Don't Feel Sorry for the Airlines"

yep, not one bit. Adding $25-50 baggage fees

Exactly, make bags free give us more room and

whoa whoa whoa, that's the free market you're going

So the minute normal free market operation ceases

whats a scok? which exit do you get off?***

Re: whats a scok? which exit do you get off?***

meh, i dont care enough. i just hate airlines except the SW***

Re: meh, i dont care enough. i just hate airlines except the SW***

What's your choice?

Re: What's your choice?

They only started baggage fees because the price of fuel went up years ago.

I guess just the employees.

Delta alone distributed $1.6 Billion in profit

Re: Delta alone distributed $1.6 Billion in profit

The root of this problem goes back to Chrysler/Harley...

Iacocca made some world class chicken salad from chickenshet

My family owned the vaunted Plymouth Voyager.

I the 80s/90s Jeep world, that interior was referred to as

We also had an '85 Supra with maroon interior.

I will take that useless cup holder challenge

K-Car vs. Mk4 Supra

All that for a dolla a year.***

Ford didn't take bailout money, but their hands are far from

I get the sentiment and agree with a good bit of it....

Re: I get the sentiment and agree with a good bit of it....

Loans was my first though too.

oh I’m not saying let em burn.

I demand free drinks & fight attendant hiring based ...

Haha, there's some old pilots that agree with your sentiment***

Re: "Don't Feel Sorry for the Airlines"- Boeing too

So many face eating leopards in this thread***

You feeling okay? Agreeing with AOC now?***

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