Shakedown
Representatives from the major airlines, who received a $15 billion aid package just last year, are asking Congress for reimbursements for money spent on added security as well as tax breaks and relief for terrorism insurance. The airlines are also asking for money to retrofit bullet proof cockpit doors.
Who do they think they are, farmers?
Do the airlines have a problem? Yes. Less people are flying in part because of the terrorist attacks but also because of the recession. The pain airlines are feeling would have been felt to some degree anyway had there been no terrorist attacks last year. That’s what happens during a recession.
In a market driven economy, it’s up to the private enterprise to take action in order to remain profitable. This may mean reducing flights, restructuring routes, raising prices or laying off employees. But it also means using innovation to bring customers back on board.
The more the federal government helps keep airlines in the air, the less incentive there is for innovation and creativity. Southwest Airlines, for instance, is the only air carrier to remain somewhat profitable after Sept. 11. This happened because the airline uses a different approach with shorter routes using the same type of aircraft.
The government came through last year with emergency funds to help the airlines. The government is also spending money hiring and training airport safety workers. There comes a time when the airlines must meet the government halfway because members of Congress are becoming skeptical.
“The carriers seem unable to muster the discipline to reasonably price their product,” Rep. James Oberstar, D-Minn, said during House subcommittee hearings on the topic.
The major airlines have long been accused of various degrees of collusion in the past with charges of fixing prices at certain airports to squeeze out low-cost competition, then raising prices when the competitors are eliminated.
Now security is a significant factor with the major airlines’ bottom line. Air carriers, like any other industry, are expected to invest in their product to insure future profitability. They can’t always expect the government to pay for upgraded security security the airlines should have been providing from the start.
Through good and bad economic times, there is always money to be made in air travel. People no longer use ocean liners and few people ride on trains. There’s a market for the air carriers’ product as long as there’s room for innovation.
The bad times we’re seeing now could provide a necessary shakedown in an industry with many weak links. If so, it should serve as a wakeup call to an industry that’s dominated by too few players that have blocked progress for too long.