Flying the Dysfunctional Skies

I recently had the thrill of two flights, each more than five hours, on an airline where I enjoy no exalted frequent-flyer status. On United Airlines' glad-to-see-ya scale, I rated somewhere between a homeless wino and a bag of snakes. True to my status, I paid too much for too little leg space, paid extra to check luggage, was told personally that I get no blanket -- and got a dirty look when I asked for a glass of water.

Like my fellow sufferers in airborne steerage, I understood why United had to treat all but a few of us like something stuck to a steward's shoe. United is one of 48 US airlines that have gone bankrupt since 1991. This includes all of them. In the airline racket, the terms "business as usual" and "Chapter 11" are synonyms.

The misery of flying "coach" anywhere these days is symptomatic of deeper troubles for both the air travel and air freight sectors. As insolvent airlines merge to survive, consolidating around a shrinking number of mega-hubs in major cities like Chicago, Atlanta, and Los Angeles, dozens of smaller cities find themselves shunted off onto what the railroads used to call "spur" lines. Travelers end up switching planes two or three times before reaching their destinations. According to the Next Republic Project, a round-trip between Pittsburgh and Washington (less than 200 miles each way) now costs as much as $1,000, consuming two travel days because there are no non-stops between these two cities.

An important article by Philip Longman and Lina Khan in the March/April issue of Washington Monthly discusses the long-term consequences of the chronic airline instability on the US economy. A typical example cited by Longman and Khan is the decision by Delta -- now America's biggest airline -- to close its Cincinnati/North Kentucky Airport (CVG) hub. The drastic reduction in traffic at CVG forced business travelers to add a stop every time they flew in and out of Cincinnati. This change choked air freight into Cincinnati and compelled several loyal local companies, including the huge Chiquita Brands International, to leave town.

All this mishegoss started, the authors explain, in 1978, when two liberals, President Jimmy Carter and Senator Ted Kennedy, teamed up to dissolve the Civil Aeronautics Board -- the agency that for 40 years had regulated fares for US carriers, making sure that all routes were fairly served. Total airline deregulation was completed a few years later by conservative President Ronald Reagan, highlighted by Reagan's legendary destruction of the Professional Air Traffic Controllers Organization.

The competitive frenzy that followed these deregulatory bombshells lowered fares and introduced dozens of upstart airlines to the market. Hooray for capitalism?

Well, for a while. But today, those low fares are a memory, and so are all those cute little entrepreneurial airlines. And the reason, as Longman and Khan are not the first analysts to point out, is that networked industries like air travel are "natural monopolies." Any form of mass transportation, as well as utilities like sewer, water, and electric power, cannot provide what is essentially a vital public service and, at the same time, conform to conventional free-market principles.

"And when it comes to such natural monopolies that are essential to the public, there is no equitable or efficient alternative to having the government regulate or coordinate entry, prices, and service levels -- no matter how messy the process may be," write Longman and Khan.

My favourite analyst of our dysfunctional skies is James Fallows, an editor at the Atlantic Monthly and author of Free Flight: Inventing the Future of Travel. I asked Fallows about the growing crisis in air travel and air freight, especially as it affects so many companies in midsized cities whose spokes are no longer connected to the shrinking pool of mega-hubs. Here's what Fallows told me:

Over the past few decades, everyone has absorbed the idea that there is such a thing as too much regulation. People seem to have lost sight of the idea that there is also such a thing as too little regulation.

We briefly learn that lesson after each new financial crisis -- and then promptly forget it, or are persuaded to forget it by interested lobbyists. The current shape of the air transport system is providing another extended lesson. Like other forms of transportation -- by road, rail, or water -- air travel can be thought of purely as a business, but it also has profound "externality" effects on regional growth, environmental protection, and new-business formation that are not fully reflected in any airline's profit-and-loss statement.

That's why all forms of transportation have historically been shaped both by business interests and public policy. Thirty years ago, the airlines were regulated too much. Now, too little.