e-commentary

How do you create a small profitable airline?  Start out with a large profitable airline.  The move of small and large airlines to unprofitable status in America is cause for concern.  The survival of many of Americas private air carrier system is in everyone’s interest.

The current insane pricing system is too baroque and requires one to earn a merit badge or obtain an MA in Ticketology.  There is so much effort expended and time wasted that does not provide any utility attempting to find an even cheaper ticket.  On any given flight, one would need to search a few rows to find someone who paid the same or even a similar price for a ticket.  “That fellow in seat 6C looks smug.  He got a better deal.  I know it.  Next time, one more search, by golly.”  The search itself provides no social benefit.  By contrast, a hurricane that inflicts a billion dollars in damages also inflicts a billion dollars in benefits because of the resulting purchases of plywood, overtime for insurance adjusters, sales of batteries and bottled water, etc.  By contrast, the process of searching for a cheaper ticket does not provide much utility even if a successful outcome provides some fleeting happiness.

The fare structure should be simplified to one fare with desperately few restrictions, conditions or limitations.  Business class fares are undesirable because the tickets are purchased by the public via an income tax deduction provided by our even more baroque and byzantine tax system.  On the other hand, in a free market, perhaps a business class section meets an acceptable public desire.  A Saturday night stay or a Tuesday afternoon stay or a Friday morning stay is not related to the actual cost of transporting humans; stay stays altogether.  Current thirty-day limitations on travel are unfounded, although a requirement that travel be completed within a year provides for the elimination of the liability to the airline within the fiscal year; this limitation really only impacts five customers.  Charging more for a ticket as one gets close to the date of the flight may appear to trap those who have no other alternative.  Trapping those who have no other alternative is inelegant, unsporting and bad business.  Set one price and then let those who want to have that ticket in hand buy a ticket early.  One astute frequent flyer plan allows a participant to walk up to the booth on the day of departure and fly if there is an available seat.  The airline satisfies a previously satisfied customer while extinguishing a liability.  The additional cost of the passenger is little more than peanuts, although admittedly some more fuel is consumed, blankets are worn and thus worn out, flight attendants must attend, etc.

The airlines should not serve much more than peanuts on a domestic flight.  They should provide fast flights not fast food.  All the different dietary needs that have been met commendably by the airlines to date (such as no peanut products in the food, etc.) are too expensive and unwarranted.  Food courts at the terminals provide food more efficiently.  Aircraft space currently committed to the galleys could be used for more seats and for an additional two inches of knee room between each seat.  Flight attendants who were originally nurses would no longer hand out fries and would instead nurse the safety of the larger number of passengers in more spacious seats.  Eliminating the food delivery to the aircraft eliminates the most vulnerable opportunity for a security breach of the aircraft.  And if someone wants to change a return time and there is an available seat, change the time once for $25 and a second time for $100.  Allowing for free time changes does not force the passenger to spend sufficient time at the outset determining his or her realistic travel plans.  Passengers treated this way will be back.

Any action by the government is likely to botch up the necessary market forces.  Create a CAB II?  BAD.  Those who laud the apparent lack of government involvement in the airline industry since 1977 overlook the nearly complete regulation of the industry at this time by the government.  The government agency is known as the United States Bankruptcy Court For The __________ District Of __________.  Bankruptcy courts are appallingly poor economic air traffic cops.  The airlines need to behave rationally with as little government activity as possible.

An airline that cut costs by eliminating these inefficiencies (and absurdities) may survive long enough to achieve profitability.  That best serves the public interest.  There are still the problems of unfunded pension plans and inadequate health care, but that is for another flight.

This entry was posted on January 24, 2005 at 9:26 am and is filed under Aviation, Economics, Politics. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.