2 comments

  1. StevePerkins says:

    I don’t want to see Delta bought out either, for the purely selfish reason that it would hurt the local economy where I work and live. At the same time though, I don’t understand the demonization of U.S. Air. I also have no problem accepting the reality that airlines MUST consolidate.

    We supposedly deregulated the airlines back in 1978, but we’ve spent the past decade swinging the pendulum back in the opposite direction. The government pours $15 billion into propping up failing business models, in the name of 9/11 relief. The industry is allowed to abuse the bankruptcy system to the point of corporate welfare, such that it is now a competitive disadvantage for a major carrier to NOT be bankrupt. Federal courts have worked with airline management to break the unions and drive down labor costs (well, other than the typical big carrier CEO’s salaries, which remain in the $10-15 million range). In spite of all this government interventionism, the major players still bleed cash.

    The bottom line is that the business climate has changed, and the feds hurt us all by trying to prop up a business model that isn’t valid anymore. It’s not that you can’t run an airline profitably; the smaller carriers do this everyday. AirTran makes good money even in the face of rising oil prices, and if you had invested in Southwest Airlines back in the 80’s you have have a higher return today than if you had invested in Microsoft. However, the business model of the major carriers simply isn’t sustainable with ticket prices being where they’re at, and the major carriers can’t have pricing prower without consolidation.

    The future may have Delta getting bought by a competitor, or it may have Delta buying out their competitors. As a native Atlantan, I hope for the latter. However, consolidation among the major carriers HAS to happen, and it’s a bit “head-in-the-sand”-ish to pretend otherwise.

  2. So, you guys love Pseudo Free trade & Corporte Welfare, but NIMBY? Thanks Erick, this place is better than reading the Sunday Comics.

    Why Do Airlines Go Bankrupt?
    Delta can’t keep up with JetBlue.
    By Daniel Engber
    Posted Thursday, Sept. 15, 2005, at 6:44 PM ET
    http://www.slate.com/id/2126383/

    S.2493
    Title: A bill to amend the Federal Aviation Act of 1958, as amended, to encourage, develop, and attain an air transportation system which relies on competitive market forces to determine the quality, variety, and price of air services, and for other purposes.

    Sponsor: Sen Cannon, Howard W. [NV] (introduced 2/6/1978) Cosponsors (5)
    Latest Major Action: 10/24/1978 Public Law 95-504.
    http://thomas.loc.gov/cgi-bin/bdquery/z?d095:SN02493:@@@D%7CTOM:/bss/d095query.html%7C

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