September 12, 2005

MAN WAS NOT MEANT TO FLY:

Airlines' estimated losses for year rise to $7.4 billion (Don Phillips, SEPTEMBER 12, 2005, International Herald Tribune)

Rising oil prices have pushed the estimated loss for the world's airlines this year to $7.4 billion, with most of the money lost in the United States, the International Air Transport Association said Monday.

Europe is just breaking even, while airlines in Asia are estimated to be making a profit of about $1 billion this year, the association's director general, Giovanni Bisignani, said in a speech delivered at the National Press Club in Washington.

"Oil is once again robbing the industry of a return to profitability," Bisignani said in the speech. [...]

The total losses for the airline industry in the United States were estimated to be more than $8 billion, he said.

If you're going far enough from home to need to fly to get there you shouldn't be.

Posted by Orrin Judd at September 12, 2005 11:52 PM
Comments

Man was meant to fly all right, what man wasn't meant to do is allow their governments to impose crippling regulation on private enterprise.

Let the marketplace work.

Posted by: erp [TypeKey Profile Page] at September 13, 2005 8:52 AM

erp:

Of course the airlines should be required to pay the full cost of Air Traffic Control and Security themselves.

Posted by: oj at September 13, 2005 9:02 AM

I flew back from Phoenix on Saturday. The plane was 20% full. I think that the psychology of $3 gas is sinking in.

Northwest has the right idea - crush the unions. The only airlines making money are the new startups that avoided union contracts. It is pathetic to watch the mechanics union members give away their jobs to satisfy some ego driven death wish. Outside of government, unions have no leverage and little sympathy from the public.

Posted by: Robert Duquette at September 13, 2005 9:31 AM

Yes.

Posted by: erp [TypeKey Profile Page] at September 13, 2005 9:44 AM

While you're at it, why don't you decree the end of the hotel, car rental, and entertainment venue industries as well, since they won't be able to survive on the walk-in traffic that will remain once you've dismantled commercial air travel?

Only drawback is that the millions of resulting unemployed would be forced to stop consuming, thus definitively popping the housing bubble and eliminating the trade deficit, which would make Alan Greenspan very happy.

Posted by: HT at September 13, 2005 1:07 PM

They'll just relocate to thev railroad stations.

Posted by: oj at September 13, 2005 1:10 PM

> "Oil is once again robbing the industry of a return to profitability,"

What is this, the 63rd consecutive year of unusually high oil prices?

Posted by: Bob Hawkins at September 13, 2005 1:13 PM

OJ - Tell that to your kids the next time they ask to visit Disney World.

Posted by: Foos at September 13, 2005 1:24 PM

They're young--they can walk....

Posted by: oj at September 13, 2005 1:39 PM

OJ:

Newsflash: the airlines are paying the full cost of security and ATC.

Never mind the foolishness of forcing airlines to pay for security against an attack on the United States.

Posted by: Jeff Guinn at September 13, 2005 4:34 PM

Jeff:

They don't fully fund TSA nor are they dunned for the upgrades and personnel the air traffic control system needs.

Posted by: oj at September 13, 2005 5:01 PM

OJ:

You say they don't fully fund the TSA. Do you have a source for that?

But never mind that. The TSA exists to protect the US from attack. To insist that a particular target be entirely responsible for completely funding its defense would be to hand the terrorist a weapon to pick our economy apart company by company.

Or Church by Church. What if the Islamofascists decided to bomb just Baptist Churches. Are they alone going to bear the cost of defense? And if not, why not, when you demand such a thing of airlines?

As for "dunning," did you know there was a move in the 90s to take the Aviation Trust fund off budget so it would no longer be raided for non-aviation spending?

Posted by: Jeff Guinn at September 13, 2005 10:48 PM

High oil prices may have prevented U.S. airlines from losing less than $ 8 billion, but that's a minor cause.

The underlying and fundamental reason that U.S. aviation is going broke is that they have huge overcapacity, in an industry with enormous fixed costs.

The current situation is just the reaping of bad decisions that have been sown for over a decade, exacerbated by, but not caused by, high fuel prices, terror, and the continued threat of terror.

Posted by: Michael Herdegen [TypeKey Profile Page] at September 14, 2005 12:57 AM

Jeff:

The Trust Fund is delinked from actual costs and doesn't allow for building and maintaining adequate infrastructure and systems.

http://www.house.gov/transportation/aviation/05-04-05/05-04-05memo.html

Because America exists in order that people might practice their religion, not in order to protect one industry.

Posted by: oj at September 14, 2005 7:56 AM

OJ:

That industry is so hobbled by haphazard Gov't regulation that it can scarcely be called protected.

Additionally, airlines aren't the only users of the airspace system (remember the AF you figure has made the Navy redundant?), and the FAA does more than just infrastructure and systems.

Take a careful look at the numbers (which I did last night, on this very reference). The total FAA budgetincludes Grants in Aid for Airports, which I'll be goes overwhelmingly to airfields whose primary, if not exclusive, use is private aviation.

When that number is excluded, airline passengers fund about 90% of ongoing operations, facilities and research.

Since there are other airspace users -- military and general aviation -- 90% is probably about right.

And when considering how much airline passengers pay in taxes, the total Trust Fund tax burden excludes landing fees -- typically $300 per.

Posted by: Jeff Guinn at September 14, 2005 3:35 PM

I'd certainly agree the Fund should pay for the Air Force :)

The obvious answer is to privatize the whole system so that fliers have to pay for everything.

Posted by: oj at September 14, 2005 3:43 PM

OJ:

Your conclusin is completely correct, but the universe of fliers includes far more than airline passengers.

FedEx and UPS, for instance, both qualify as major airlines in terms of size and flight operations, yet carry no passengers. Therefore, their contribution to the Fund is substantially less than the airlines, despite getting precisely the same services from the system.

Additionally, general aviation, outside fuel taxes, pays nothing for ATC services. They have stoutly resisted a fee-for-service approach, which is why I quit the Aircraft Owners & Pilots Association.

Posted by: Jeff Guinn at September 15, 2005 7:55 AM

It would seem more sensible to have airlines pay on the basis of the level of their use of the system.

Posted by: oj at September 15, 2005 8:06 AM

OJ:

I think that is currently the case -- they pay about 90% of the FAA's costs absent airport grants, and they probably represent about 90% of the burden on the ATC system

I think, but can't prove, that cargo haulers, because they don't carry passengers, pay too little. I'm just guessing, but based on the callsigns I hear, the FedEx-es of the world represent an additional 5-7%.

General Aviation pays the least; however, making them pay full freight (particularly where it comes to airport grants) would probably completely kill general aviation in the US ...

In any event, I don't think it is true that airlines are subsidized to any signficant extent, if at all.

Posted by: Jeff Guinn at September 15, 2005 11:56 AM

they're subsidized extensively because of all the secondary things that aren't paid for by the Fund. More importantly, the system isn't being kept modern, which means they're being undercharged.

Posted by: oj at September 15, 2005 2:05 PM

OJ:

Such as what secondary things? (Honest question, I simply don't know what you mean)

As for the system not being kept modern, that can scarcely be laid at the airlines feet, for the FAA has wasted billions of Trust fund money on projects so ill-managed as to be junked. So the lack of modernization has nothing to do with the money airline travel has provided, and everything to do with FAA incompetence.

Posted by: Jeff Guinn at September 15, 2005 2:24 PM
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