Airline Deregulation - A Total Disaster (purchase, interest, financial, paying)

[gwynedd1]

Of course unions are the problem for airlines. As I said they operate in a pseudo free market. If everyone is in a union, no one is. Airlines operate in cut throat international competition but are also drawing labor from a union/cartel that was viable when there was a controlled domestic market.

We are not in a classical Smith/Ricardo economic society. We are in a feudal economic society. Much of our spending is government. That is not a market economy. The public school system, military, college subsidies and social are all top down arrangements from the feudal lords. Doctors, Lawyers, accountants and the professional classes are there in part to control the flow of labor into the market. Doctors are treated brutally in residence to constrict the labor market into the field . That why pilots are paid so little. The military trains them and the barrier to entry is very low. Pilots come off the assembly line cheap by government subsidy.

Automobiles and airlines cannot create cartels very well because of all the international competition. That exposed the economic feudalism of the United States that cannot compete in those sectors fraught with it. Airlines, Automobiles are feudal systems exposed to international competition. If we did allow them to constrict supply and drive up prices it would simply drop down to the tourism economy and they would certainly lose world wide market share and perhaps need to create their own cartel which would need to shrink the market and drive up the price(for a total loss of output).


We simply have no idea what we really are. We have been brain washed for so long. Our food, education, banking , military, professional classes, liquor distributions, water subsidies, and on and on are all cartels. Of course when one industry is deregulated it hits them hard because they are the only one's exposed. Its simply that with cars and airlines there is international competition which is the real problem they face. Planes fly in from anywhere. Its pretty simple economics.

[golfgod]

I always get a chuckle out of (usually conservatives) decrying the dereg of the airlines because it was done by Carter, but praising all of the other dereg-electric utilities anyone?

John 23 wrote;

Brutal costs, maintenence, high oil. Absurd contracts. Overally, ridiculously high costs to stay in business

Unfortunately John you don't know whereof you speak. The three big costs in running an airline are FUEL (they all pay the same), DRIVERS/PILOTS (believe it or not the "legacy" airlines and Southwest are not as far apart here as "everyone knows") and CAPITAL, which is the big one!

Just how much do you think the cost per hour is on a 737? The reason SWA does so well and the legacy carriers SUCK OUT LOUD on this last (usually the biggest) cost is because SWA's equipment STAYS IN THE AIR (which is the only way to generate revenue) while the "hub and spoke" carrier's planes spend way too much time sitting at the hubs waiting for the PAYING CUSTOMERS to arrive. The last time I saw a study on this SWA enjoyed about a SEVEN PERCENT cost advantage over the hub and spoke carriers.

In any industry you can name a 7% cost advantage is going to lead to a true market leader!

BTW, without dereg it's unlikely that SWA would exist in anything close to its present form.

golfgod

[wheelsup]

Originally Posted by gwynedd1

Automobiles and airlines cannot create cartels very well because of all the international competition.

That argument doesn't hold much water with me. My buddy is flying the same aircraft in China as me and makes $150k/yr (USD) where I as a Captain on the same aircraft made less than $75k/yr in the States, and I am at the highest paying operator of that type. Foreign operators pay their pilots significantly more money than we enjoy in the United States. Even places like Nigeria are paying retired pilots from my company $10k/month to operate aircraft there.

[gwynedd1]

Originally Posted by wheelsup

That argument doesn't hold much water with me. My buddy is flying the same aircraft in China as me and makes $150k/yr (USD) where I as a Captain on the same aircraft made less than $75k/yr in the States, and I am at the highest paying operator of that type. Foreign operators pay their pilots significantly more money than we enjoy in the United States. Even places like Nigeria are paying retired pilots from my company $10k/month to operate aircraft there.

Hi wheelsup,

That argument does not hold much water for you because you failed to take into account the economics. Not only does the air force teach you to fly planes they actually pay you. There is a very low barrier to entry for the labor input. The United States spends a great deal of more money on the military and trains far more pilots. Thus the supply for US pilots is higher than in any other place in the world. However it is also not fixed capital and is very mobile. Your buddy just took all that cheap tax payer subsidized training and became a pilot for China. Thus the US airline industry loses some of its advantage of cheap domestic labor.
Adding to this burden many air carriers of subsidized thus are a protected market through subsidies. The US airline companies are the one "unconspiracy" in the mix since they deal with a labor cartel and they compete internationally often against subsided competitors. In the case of pilots even the union cannot keep the price up from the huge supply of pilots although its still a good living compared to the airline capital.

[wheelsup]

Both my buddy and I paid out of our own pocket to learn to fly. Around $35k-$40k each just for the certificates. The reason there are so many pilots in the US is because our standards are lower, and our prices are cheap. Ever look into converting an FAA certificate to a JAA certificate? And the cost involved?

In addition even though there are more pilots here, there are far more commercial airlines. I would bet the ratio of commercial pilots:air carriers is lower here than in many other countries, simply because they don't have many air carriers.

Adding to this burden many air carriers of subsidized thus are a protected market through subsidies.

Huh?

[gwynedd1]

Originally Posted by wheelsup

Both my buddy and I paid out of our own pocket to learn to fly. Around $35k-$40k each just for the certificates. The reason there are so many pilots in the US is because our standards are lower, and our prices are cheap. Ever look into converting an FAA certificate to a JAA certificate? And the cost involved?

You are still competing with ex-military.
Its also another reason why is cheaper since many pilots will start schools and set standards. Lowing standards will add to the supply of students. When Novell was a file serving monopoly a Novell certified engineer was very high quality in that they could do what they were trained to do.When Microsoft wanted to expand its market they increased their Microsoft Certified Engineers by lowering the standards. Its another side effect of competition.

In addition even though there are more pilots here, there are far more commercial airlines. I would bet the ratio of commercial pilots:air carriers is lower here than in many other countries, simply because they don't have many air carriers.

Also agreed, there is a lot of domestic competition as well

Huh?

Competitors Decry EU Approval of $3.7 Billion Subsidy : Air France Bailout Heads for Court - International Herald Tribune

Unprecedented billions in subsidy are being poured into the state-owned European airline industry," Mr. Peña complained, adding that there could "hardly be competitive parity so long as some airlines are propped up." An aide to the U.S. transportation secretary said Wednesday that the letter had been sent because the Clinton administration was very concerned about the latest decisions in Brussels.

[wheelsup]

Originally Posted by gwynedd1

Its also another reason why is cheaper since many pilots will start schools and set standards.

You *do* realize that the FAA sets the standards, and upholds them with designated FAA examiners, NOT pilots, right?

When Microsoft wanted to expand its market they increased their Microsoft Certified Engineers by lowering the standards. Its another side effect of competition.

That's what the airlines are doing, when the pool of what used to be qualified applicants dried up de to pay cuts, QOL issues, lack of career advancement, etc. they simply lowered their standards to obtain applicants. Is the airline industry really where you want qualifications to be cut? Either there needs to be more regulation in allowing start ups or airlines need to be nationalized and subsidized similar to Amtrak.

[Mike from back east]

Here are some ominous numbers regarding the pilots....as the aging guys retire, what level of expertise do you want flying the planes you travel on? As I've said before, those low fares are going to cost us later, in more ways than one.

[Traderx]

Originally Posted by Mike from back east

Here are some ominous numbers regarding the pilots....as the aging guys retire, what level of expertise do you want flying the planes you travel on? As I've said before, those low fares are going to cost us later, in more ways than one.

Man, I already hate flying would you stop it

[wheelsup]

If you really want to be scared read thru the CVR transcript of Flagship 3701, it's a NWA (now Delta) connection carrier with around 120 aircraft. The only saving grace is no passengers were on board as it was a ferry flight.