April 12, 2008
The American Fallout
American Airlines announced today that it was canceling nearly 600 more flights on Friday due to delays in checking and repairing their fleet of MD-80 aircraft. Standard & Poor's has come forward to project that the costs associated with the groundings, cancellations, and rebookings will exceed $30 million. Additionally, S&P stated that the cancellations are likely to impact any decision on the part of the airline to raise its rates to offset rising fuel costs.
Not surprisingly, the media has jumped on the bandwagon of airline bashing in the wake of American's problems. For example, the business news outlet CNBC ran a video report suggesting that airlines in the United States should be nationalized. The report, "Time to Deregulate [sic] the Airlines?," featured CNBC anchoress Erin Burnett conflating issues as diverse and complicated as airline service, safety, infrastructural constraints, and business losses into a pseudo-argument for radical, government-mandated, changes to the industry. On the opposite end were aviation reporters Matthew Wald of the New York Times and CNBC's own Phil LeBeau. Both made strong cases for the clear benefits of deregulation and pointed out the detrimental impact a nationalized airline industry would have on the U.S. economy.
While Burnett's "reporting" was inexcusable for its flagrant disregard of setting forth the issues in a coherent manner, her attitude bespeaks a larger problem that concerns the public's perception of the airline industry. Too often, in the face of manifest problems, there is a call for government to step in and manacle the airlines. What is overlooked is the fact that many of these complications are not the result of some cavalier attitude on the part of airlines, but rather linked to a series of complex problems with infrastructure itself. So long as the U.S. continues to manage its air traffic with an antiquated air traffic control system, issues involving long delays, cancellations, and inefficient flights will not be rectified. On the safety end, an FAA that decides to run hot and cold on oversight will
almost invariably have a severe impact on the grounding of airplanes each time it decides a "crack down" is due in order to save its public image.
An editorial from yesterday's New York Times put it best: "If there can be any good news in hundreds of thousands of passengers being stranded as airlines ground fleets of planes for urgent inspection, it is that the Federal Aviation Administration is doing its job. Unfortunately, it is trying to make up for years of not doing its job in keeping them safe, and travelers are the victims." Even more unfortunate is that those victims, understandably irate as they are, seem more inclined to blame the airlines
rather than the government. With the fervor over passenger rights still running high, it is not unforeseeable that these problems will add up to swift legislative action. The looming question remains whether such legislation will be rationally drawn and built into a larger package of reforms to improve infrastructure and oversight, or whether it will merely be an empty showing of government paternalism over its petulant child, the aviation industry. If the latter proves true, it could have devastating effects for an already beleaguered industry whose existence and sustainability are critical for America's economic wellbeing.
April 10, 2008
From the News
American Airlines announced today that it was canceling 933 more flights in order to inspect and repair wiring on its MD-80 aircraft. This most recent news brings American's total canceled flights to over 2,500 since Tuesday when this internal crisis began. American is hopeful that it will be able to return to business as usual come Sunday, though that could certainly change. One positive sign is that the flight reductions themselves have started to decrease and over a third of American's MD-80 fleet has been returned to active service. American's safety difficulties appear to be rooted in the FAA's recent oversight crackdown. As readers of the blog will no doubt recall, the FAA has been under intense public and political scrutiny since it was accused of laxity in its inspections of Southwest Airlines' fleet. In addition to American, Delta, Alaska, and Midway Airlines have also been compelled to ground portions of their fleet in response to FAA safety demands. While there is no word yet on what the economic impact will be from all of these groundings, Gerald Arpey, American's CEO, stated that the groundings will cost the airline tens of millions of dollars.
On the passenger rights front, a breaking news report indicates that federal passenger rights legislation-now the only hope for airline consumer groups following the Second Circuit's decision in ATAA v. Cuomo-looks to be going forward. The current FAA reauthorization bill, which has sat lifeless on the dockets of the House and Senate for months, contains marching orders for airlines whose aircraft are left out on the tarmac for three or more hours. In addition to requiring provisions for adequate food, water, and working toilets, the proposed legislation would also allow passengers to request a return to the terminal if the plane has sat at the tarmac for at least three hours and the captain determines there is no imminent sign of departure. It now appears that the federal passenger rights act will be removed from the reauthorization bill and reattached to moving legislation.
Finally, on the analysis front, the Wall Street Journal's Scott McCartney has an intriguing piece on the supposedly new airline attitude toward customers of out-of-business carriers: "It's your loss, not ours." Citing the fact that Congress allowed protections for airline customers expire in 2006, McCartney stated that consumers should no longer expect other carriers to honor their tickets. Consumers should therefore be wary about purchasing tickets on struggling carriers; unless they have a code-share relationship with one of the more stable airlines, options for rebooking will remain slim. As a further point of interest, McCartney supplied a "Carriers to Watch Closely" list which included Frontier Airlines, ExpressJet, Sun Country, and Italy's version of the "living dead," Alitalia.