Recently I’ve been reading a lot of articles & seeing a lot of media attention over the fight between Delta & the ME3 – composed of Emirates, QATAR & Etihad. And Delta is definitely coming out swinging with allusions of unfair playing fields, government subsidies & many other claims against these carriers. And other carriers are claiming the same thing as well, but in reality we’re doing similar things with our airports & services here in the USA.
And I’ve got a totally different view on it: Let them compete here in the USA. Welcome them with open arms, let these carriers (And for that matter anybody who wishes to come into the USA) fly within our borders, purchase our airlines & wake the Big Three up.
Now, I can hear the grumbling now. “How anti-American can you get! That’s unpatriotic!” Go ahead – curse my name, call me nasty things. But let’s take a deeper look into why this would be a good thing, and how it could finally awaken our airlines to do their job better, and to make the experience more passenger friendly.
Back to the Beginning
To start, we need to go back in time to the early era of Deregulation. From 1978-1990, 86 airlines achieved the start of pure-jet service in the USA, bringing forth a new wave of competition which shook the majors into losing their sense of complacency. Carriers like PEOPLExpress, America West, Midwest Express, Midway & Southwest took the country by storm, and each represented a different take on how airlines should operate within their niches. And the majors were totally unprepared for this, many of which went through transformations to learn how to compete again. Formerly stodgy & unresponsive network airlines had to re-think how they presented service, many of which rose through their own merits to give the customers a good product at a reasonable price. No longer protected under the C.A.B.s hand, they had to improve or die – which of course, some did improve, and some did die.
The ability for upstart airlines in the USA to appear in the modern era has been stifled by the Big Three. The cost of entry is so high that it is prohibitive, with a new carrier needing upwards of $500,000,000 million to even get a plane in the air, and to survive the first few years without going bankrupt. And even then, the course is rocky – not every carrier will be able to survive the competition from the network carriers, or even the ULCCs. Basically, our airline industry has become stagnant – with little innovation from the Big Three.
So here come the ME3, the Europeans & others. Some have figured out back-door ways into the US market. Norwegian, whose use of international route access points means they can operate into certain Caribbean markets & mainland Europe with bases in the USA. Other carriers such as Lufthansa have bought into other carriers as far as they can under the US law of 24.9% ownership. And the ME3 are asking to fly domestic segments within the USA.
And the protests begin – by the Big Three. They don’t want the competition. They say they will undercut fares & fly using unfair subsidies. They don’t want other kids playing in their sandbox.
Well, tough!
Let Them In
Let’s open the door to foreign airlines in the USA. Let them come and start service in the USA. Allow them to run flights across our country, with better service, better fares & better competition. Give them a chance to show what a better product does to a passenger’s choice of carriers.
Our airlines here in the USA have become stagnant again. Service is non-existent domestically, unless you’re willing to fork out a healthy hunk of cash for domestic business or first, and even then, the product doesn’t match the price. While we have welfare airfares in coach, the add-ons of luggage, seat assignments & other items often pushes the fares up, sometimes to rather astounding levels. On a recent trip to Knoxville, the discounted airfare was over 500.00 round trip – NOT including the 50.00 in luggage fees, the food I had to buy prior to travel or any of the other things I required for the 7 hours by air to/from there. So while we have (in theory) lower prices in some markets, the service doesn’t match the prices overall.
Now let’s look at what an equivalent journey on Emirates has in economy: On a short 1 hour flight, cold sandwiches, candy & beverages are served. On a three hour flight, a full hot meal service is served, including appetizer, salad, meal & dessert, plus beverage services. And on a longer 6 hour journey, a full meal service, and a second hot snack service follows. And it isn’t just the ME3 doing this – it is almost all major airlines in the world offer this level of service. Price wise over the same distances – the fares match our domestic carriers, and in some cases are less.
While I don’t think we need meals on an hour flight, or even more complex services on mid-length trips, there are some serious holes in how our US carriers are operating and treating the passengers. And there is no reason for the Big Three to change, as there is no real competition from anybody providing a better network product at a price people are willing to pay. And the Big Three know this, and smile quietly to themselves about how they now hold 66% of the US domestic market to themselves. Count in Southwest Airlines, and this surges to 84% of the domestic capacity is held by four carriers. The remaining percentage, held by the ULCCs & Niche carriers, provides very little in the way of challenging the major airlines.
Conclusion
Back in 1984, Alfred E. Kahn, father of deregulation, was quoted as saying “There will never be a time when we will have less than 12-13 major domestic carriers in the USA.” This should be engraved on his tombstone as a reminder. And without new competition, our airline industry will remain in stasis, with no impetus to change or even invest in the passenger & product part of flying. Let the ME3 – and others – in. And let the Big Three know that they can be challenged to improve to compete.
Other “Must Read” posts by RD Sussmann:
- Shuttle Diplomacy: The Rise of American Aviation’s Backbone
- United Untied – What Happened to this Once Great Airline?
- Low Cost Carriers: The rise, fall, rise, fall, and rise again of the basic airline.
- Editorial: Delta Airlines – The Sleeping Giant Awakens
- Editorial: The New American Airlines
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I remember when Western airlines was “the only way to fly.” Now, domestic travel on a U.S.-based carrier is on par with riding the bus. Whatever forces Delta and United to invest their record profits in upgrading the soft product, I am for it.
You can’t ignore the subsidy issue. If the US carriers cannot compete , “so what?” means you are ok taking them down? Some may be profitable in some years but this has not been the norm. They are not rolling in dough. Don’t get me wrong, I agree that the US product sucks compared to the others, but “healthy competition” without a level playing field is not the solution.
Superb post and argument R.D. I too “remember the days” of Piedmont airlines here in the US, when you could get great service, cheap fares, comfortable regional jets, free luggage, good food/snacks even on short haul flights, and really decent human treatment — back before awful, ugly US Airways swallowed it and utterly ruined it. That for me was a bitter sign of things to come. Things are so bad now I’m grateful for Southwest Airlines’ free bags, changes, companion passes, etc., even though I’ve come to much despise their increasingly uncomfortable and arrogant cattle cars (and over-crowded coral gates)…. Took a 4 hour flight with SW recent from Aruba…. and all we got was those miserable peanuts — ya know, the ones that chirp, “because we like you.” (no, becuz you SWA execs are too damn cheap)
Into the din, YES, let’s hear it for the ME3…. I flew with Gulf Air when they were first starting (out of Tehran, Doha, and Manama)…. even then, they were a glorious, delightful hoot…. Today, I’m impressed I can book cheapest international coach fares via Qatar Air to just about anywhere in the world, on AA points, from even small US airports (albeit w/ partnerships with AA to the US gateways)
And to …. (*#$%) with the US monopoly carriers and their pious fraud about the ME3 being unfairly subsidized…. What a load of hypocritical, faux-headed, jingoistic misdirection . Kudos to you (and John Olila) for being among the decent voices daring to call out such nonsense. Keep it up….
and let competition return to the friendly skies.
I realize that Oman and Gulf airlines don’t serve USA but we can use them once we are in Europe. How do they compare with US airlines? Same for other Asian airlines.
From my own experiences with Gulf a few years back, the service in economy is on the same level as it was here in the USA back during the 80s & 90s – nothing over-the-top spectacular in terms of the basic soft & hard products – but the attentiveness of the crew and the quality of the food was quite good. For the most part, I’ve found that even the larger regional carriers (EVA Air, Jet Airways, FlyDubai, etc.) have much better standards of service in economy than just about every carrier in the USA does. Even FlyDubai has begun to upgrade their soft product on flights of 2.5 hours or longer to include larger snacks (Sandwiches, cereals, etc.) as a complimentary item, with hot meals & such available for a nominal (and reasonable) price. On a recent trip to Hong Kong on EVA Air, the flying time from Taipei to Hong Kong just over 90 minutes as scheduled. On that short flight on an Airbus 330, we were served a full hot meal, beverages & duty free. And the crews were outstanding in how they performed their duties on such a short flight. Meanwhile, on a trip on United Air Lines from Phoenix to Washington/Dulles, we saw the crew for two beverage services – and that was about it.
We have so much room to grow & become better in the USA as far as airlines are concerned. Our soft product (and in some cases the hard product) are nothing close to what they should be. I realize airlines are a business – but they are a service business that has forgotten the most important word: Service.
R.D.
I couldn’t agree more. I live in Knoxville, so I’m pretty familiar with bad prices, few direct flights, and indifferent service. I grew up on Pan Am as well, and miss the now-alien concept of good airline service. I’d love to see some competition from the ME3. Drop this protectionist stuff. Isn’t that what a free market is supposed to be all about?
Ugh – I feel your pain. I usually visit eastern Tennessee several times a year (Yes, I’m a Dolly fan…) and it is one of the worst places in the USA to get from A to B. Back under regulation of course, service was balanced so you could do a trip there with ease. As of yet, I’ve transited many hubs getting there – Atlanta, Charlotte, Chicago, Houston & even Washington/Dulles – and always have the worst flight times to make it there by evening.
We are in a very tough predicament – while the industry is deregulated, costs are so high to enter the airline industry that to do so requires a huge sum of money. And the list of start-up failures is immense. I have often thought that if carriers really wanted to go after better markets, they would look to develop some of these cities like Knoxville with better point-to-point service. I can only hope someday they will wake up and do so.
R.D.
Shawn –
So well said! I grew up with Pan Am and TWA and Braniff and those magnificent brands which truly understood and delivered amazing products and service in the air.
We can only go up from here!
Healthy competition is at the core of a free market system.
Thank you – I grew up with TWA, Northwest Orient & Eastern as my ‘local’ carriers in the northeast USA, and the service was always something one could count on for being good. Though Delta shows promise with their moves, nobody in our industry currently offers a decent product for a decent price.
I wrote my graduate thesis on Braniff International’s concepts of service & frequency – and their downfall. It is a shame that a single bad prediction by Harding Lawrence brought them down so hard. As for TWA, it was bad luck combined with an even worse owner (Icahn) that spelled the end of their days – much to my displeasure. When they folded into American some 14 years ago, I lost a carrier that was reliable, safe, clean & dependable.
Competition makes carriers stronger – and makes them compete better. We need this back in our airline system.
R.D.