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Re-regulate the airlines? Heck, yes

Now that the government is busy regulating broad swaths of the American economy, isn’t it time to consider re-regulating the airline industry?
Image: Airplanes
Airlines must also look back on the pre-deregulation days with fondness. In the three decades before deregulation, the commercial aviation industry had only three unprofitable years. Since then, it’s had 14 losing years. Eric Miller / Reuters file

Now that the government is busy regulating broad swaths of the American economy, isn’t it time to consider re-regulating one more sliver? Shouldn’t we do something about the airline industry?

Of course we should.

Airline deregulation seemed like a good idea three decades ago. The Airline Deregulation Act sought to make the commercial aviation industry more competitive by lifting government controls and allowing airlines to compete with each other.

But oh, what a disaster it turned out to be. If you’re a passenger, you’re seeing the results of a recklessly deregulated airline industry right now. Airlines treat us like cargo — and they get away with it because the government has taken a “hands off” approach to the industry.

Airlines must also look back on the pre-deregulation days with fondness. In the three decades before deregulation, the commercial aviation industry had only three unprofitable years. Since then, it’s had 14 losing years.

Turns out their customers were tougher regulators than the government. Passenger yields, a measure of how much money is made for each mile a customer flies, have plummeted from 8.29 cents per mile in 1978 to 4.06 cents per mile last year when adjusted for inflation. That number suggests flying is more affordable than ever, despite the recent doom-and-gloom reports of rising fares. It also says airlines are barely able to make any money from the fares they charge.

So, is anyone happy?


Here are eight things the government should consider regulating.

Ticket prices
Airlines shouldn’t be allowed to offer unreasonably low fares. It’s just a game. They’ll figure out a way to add surcharges and other fees to cover their costs. (More on that in a moment.) Maybe it’s time to consider the idea of minimum fares, which would achieve two things: First, they would ensure that airlines continue operating. And second, they would eliminate the reprehensible practice of predatory pricing, where a dominant airline lowers fares so aggressively that it drives a new competitor out of town — and eventually, out of business. But should the government regulate prices? Actually, it already does in some places right here in the U.S. of A., including controlling prices on everything from apartment rents to utilities.

Executive pay
Delta Air Lines chief executive Richard Anderson will pick up stock awards worth about $13.6 million beginning next year as a reward for merging with ailing Northwest Airlines. Delta lost $50 million last quarter. Do you really need me to tell you this is madness? Airlines that accept any kind of government help — whether it’s loan guarantees or tax breaks — ought to be required to cap their executive compensation. If banks can do it, so can airlines.

The price of an airline ticket must include all taxes, fees, surcharges, drinks and meals (on longer flights), a piece of checked luggage and a carry-on bag. The European Union is about to require this kind of price transparency. Why not here? There’s only one reason I can think of: By deceiving customers into thinking tickets are cheaper than they are, cash-starved carriers can sell more seats. Long term, they aren’t doing themselves or their customers any favors by misrepresenting the true cost of a ticket.

Human rights
Seats should come with minimum legroom and a minimum width, consistent with the average height and weight of passengers. On longer flights, essentials like water and food need to be included in the price of a ticket. Passengers shouldn’t be imprisoned on a plane that’s parked at the terminal without access to working restrooms. It’s astonishing that airlines need to be told that this is the right thing to do. They should already be doing it. But since they’ve lost their moral bearings — indeed, animals in the cargo hold are often treated better than paying customers in economy class — perhaps it’s time the government helped them find it.

The truth
Airlines should be required to give passengers the facts about delays and cancellations. No more blaming the weather when it’s actually a mechanical problem. No more “creeping” delays in which customers are strung along, often for hours, until their flight is canceled. Airlines should not be permitted to sell more seats than they have. That would take care of the problem of involuntary denied boarding — better known as “bumping.” No more codesharing, either. It’s fundamentally dishonest and should be illegal.

Frequent flier programs
Airline loyalty programs have been referred to as unregulated lotteries. Personally, I think they’re the biggest scam ever perpetrated on the traveling public. Let’s regulate the lottery, at least. Maybe it’s time to require airlines to tell us how many miles are outstanding, how many award seats are available on a given flight, and how much our miles are worth. Oh, and award tickets should be free. (Otherwise they’re not “award” tickets, right? They’re just tickets.) Air carriers should be required to file their program member agreements with the government and to ask for its permission when they make a change to it. Better yet, we should abolish loyalty programs, because on balance, they hurt consumers.

Passenger compensation
In 2004, the European Union adopted tough new airline passenger rights regulations that required airlines to compensate air travelers when flights were delayed and canceled. Regulation 261 (PDF) isn’t without its problems (for example, it has a provision that lets airlines off the hook during “extraordinary” circumstances, which are not well-defined) but it goes much further than any current American regulations in ensuring delayed passengers are treated fairly. In addition to adopting a 261-like rule, the government should require that airlines ask for and receive approval to change their contracts of carriage — the legal agreement between them and their passengers. Gaping loopholes in the contract need to be closed, too. Among them: airlines need to compensate passengers for all of the property in a lost or damaged bag, not just a select few items.

Common sense
While we’re at it, the government should consider making a few tweaks to the way airlines do business. For example, airline tickets should be transferable. Changing the name on a ticket, particularly if you’ve made a typographical error, shouldn’t cost an extra cent. (After all, it doesn’t cost the airline anything to change an electronic ticket.) A change fee shouldn’t be more expensive than the ticket, either. What’s more, a ticket ought to represent an airline’s obligation to get you to your destination when it says it will — not when it gets around to it. I realize that common sense can’t always be legislated, but that shouldn’t stop us from trying. The Transportation Department should be given broader authority to stop some of these outrageous airline practices.

If you’ve made it this far in my deregulation diatribe, you’ve probably arrived at one of two conclusions. One, you think I’m a socialist. That’s fine. I’ve been called worse.

Or two, you’re wondering if it’s such a good idea for the government to get involved in the airline industry. That’s a reasonable response. To which I would say: No worse than if the government didn’t get involved.

It isn’t hard to imagine a future in which the few surviving airlines are virtual monopolies. It’s a world where fees and surcharges account for the bulk of your ticket price, where customers are never right, and in which you would do anything to avoid air travel.

Do you really want to go there?

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