Jeremy J. Jones – Stranded in Thought

May 26, 2009

Antitrust Me: We’ll Be O.K.

Filed under: Opinion,Politics — Jeremy @ 9:09 pm

We occasionally hear much talk about U.S. antitrust law in our media, but only when a frenzy is afoot. The most recent big news was the pursuit of Microsoft by the U.S. government for violating said antitrust law, by forcing out smaller competitors and racing to market to obsolete products and retain its monopoly.

Antitrust law is very complicated, and I have not researched it in any great detail. But I do know its intent; antitrust law is designed to protect both consumers and business from unfair business practices by: trusts, groups of companies conspiring together to control access to products or to control prices and effect a monopoly (also called cartels); and single companies who use their power to force out smaller competitors – we could argue which meet this definition for a long time.

What I’ve found interesting for a long time is that while Microsoft might have violated these laws, the U.S. airline industry has been doing so daily since its deregulation in 1978. Here are a few examples:

  • The companies work together to set prices to the market; when one raises price, all the others do the same within minutes, and vice-versa.
  • Each of these companies has absolutely horrible customer service, though some are far worse than others. The general attitude of the airlines is: “Go to hell. We’re too big to care what you think.”
  • Each company is filled with unions that slow down work processes, drive up costs, and create more errors than they fix, and yet, none of the companies seems to mind this.

What is most stunning about these and countless other examples is that the U.S. government doesn’t seem to care. This group of companies was the first that was “too big to fail” in 2002, when billions of dollars were doled out to companies in order that they might stave off bankruptcy. And several of those who took bailout money have since filed bankruptcy anyway. Brilliant.

The notable exception to the acceptance of bailout funds was Southwest Airlines, which escapes this essay without a target on its back; it could be better, but that company is leaps and bounds above the others.

Despite all of this, no one in Washington ever says a thing about the airline industry, most likely because politicians fly on private jets at taxpayers’ expense, but that’s another discussion. So consumers are at the mercy of an industry that raises prices on a whim, but lowers them with molasses-like slowness; has anyone seen a removal of the fuel surcharges added last year in response to gasoline prices, even though fuel prices are now approximately half what they were then? No. And all are quiet about it.

Regarding the poor service one experiences when flying, I’d like to make an exception. I’m sure there are more, but we only remember the bad usually. But this one stands out; Chesley Sullenberger and his crew on board US Airways flight 1549, which was successfully put down in the Hudson River in New York, saving the crew and all passengers, and all citizens on the ground. These people have the right attitude, dedication, and strength. It’s too bad they’re not the ones running the company; it might just get fixed.

On the other hand, we have the pilots of Colgan Air Flight 3407, which crashed on approach into Buffalo on February 12, 2009, killing 50 people, including both pilots. In May, results of the NTSB investigation were released, and it turns out that these two pilots had absolutely no business being in that plane, on that approach, at that time of year. Neither pilot had ever flown in icy weather. They also had remarkably little flight time between them. But that’s not all. They actually were discussing their fear of the ice, having never flown in it, rather than checking their flight instruments, up to the moment of the crash. These pilots were ill-equipped for the situation into which they were placed. They could have denied the route, but that would likely have cost them their jobs. I blame not the pilots; based on the evidence, I’d say they did their best, and that it unfortunately and tragically was not good enough.

Rather, I blame the airline for having placed those pilots in such a situation in the first place. Many would assert that it is greed or search of profit that killed those 50 people. That’s true, but not in the way most people might think. You see, there is a little statistic that airlines keep that could be called “on-time delivery.” This is a measure of how accurately to flight schedules passengers actually get delivered. To my knowledge, there is a bit of tolerance, but it is quite limited. Pilots are pressured to be on time: not too early, and definitely not too late. If pilots have a bad track record with on-time delivery, they get cut by the airline, and have a hard time finding other work. So pilots, especially in the biggest economic downturn most of us have ever seen, will fly even when they are not comfortable to keep their jobs. Hence, those two pilots had that plane in the air, even though they were scared to death of the ice. That is the real tragedy in this case. 50 people are dead because two pilots were more afraid of being reprimanded for being late than crashing the plane. Terrible.

On the lighter side of this topic, let’s have a look at how airlines measure themselves, and promote themselves to us. They like to tout that they have 99.5% on-time delivery, and numbers like that. That sounds really good, until you think about it, and realize it is a ridiculous figure. The average big airline, like American Airlines, operates between 300 and 500 flights per day. This means, on the small side, that to be 99.5% on time, only 298.5 flights need be on time. The other 1.5 flights can be early, or late, or very, very late, and it doesn’t reflect in the figure. Also, I suspect that canceled flights aren’t taken into consideration, because once canceled, they are no longer scheduled to land anywhere and therefore cannot be late. So all these details point us to one reality of airline travel, as far as the airlines are concerned; it is better to have one plane five hours late than ten planes five minutes late.

Why is that? Because assuming our 300-flight example, ten late planes would mean an on-time delivery of 96.7%. That’s a huge difference. However, in the first case, one five-hour late flight, we have a couple of hundred hugely inconvenienced people. That’s certainly better than 2,000 slightly late people.

I’ve wondered for a long time now, why have one plane forty-five minutes late when we can have nine planes five minutes late? Rather than making 200 passengers wait for forty-five minutes, resulting in many missing their connections, we could stagger things. Here are a couple of examples:

  • Mechanical problems, and we have to wait for another plane? No. We take the next plane of comparable size to leave, and those passengers take that one. Bump every plane up by one, and we eventually catch up, and everybody is maybe five or ten minutes late. Ah, but that would wreck on-time delivery.
  • Flight crew delayed? That one is my favorite. Get another flight crew. There are about a dozen around at any given time. Move the flight crews to different flights to get everyone where they need to go. But oh, I forgot; the pilot’s union won’t stand for that. “We don’t care if you’re going to miss your connection in Chicago, Mr. Customer. We’re going to Miami for the weekend.”

At the risk of coming off a bit harsh (I do that sometimes), maybe the airline industry should stop holding its hands out to Washington and instead use them both to pull its collective head out of where it’s stuck.

These companies are the worst kind of monopoly. They seem to think that consumers exist to serve them, rather than the other way around. It’s the reason that smaller carriers like Southwest have been slowly becoming huge by changing the game. Oh, and actually listening to the customers.

A novel idea.

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6 Comments »

  1. These companies all feel that the consumers are here to serve them. They feel that this is also they way they feel about the government. There are never any consequences due to the fact that the government officials get perks from all the rich guys, therefore turn their heads to any criticism.

    And our voters are universally too ignorant to recognize the fact that the politicians are taking them for a ride. The average voter only looks to their own selfish interests, they ignore the big picture.

    Comment by Merriweather — May 31, 2009 @ 3:01 pm

  2. True. I think even more so that the average voter fails to know their own selfish interests; rather, they take whatever is fed to them by the most charismatic politician of the day.

    Comment by Jeremy — May 31, 2009 @ 6:35 pm

  3. If there were just metrics to prove that if you do a good job the profits will follow. I guess that’s too simple a formula though. Much better to play around with on-time stats. Too bad the airline industry is about the only way to travel far quickly.

    Comment by KC — June 5, 2009 @ 5:04 pm

  4. Unfortunately, Kevin, in real life the only appropriate metrics would show that if you kiss ass, success will follow. The world does not reward a good job, especially if one is truthful and honest.

    Comment by Jeremy — June 6, 2009 @ 1:11 am

  5. I think perhaps if you work for yourself then good hard work will be rewarded, but I tend to agree that honesty and hard work won’t do to much for you when working for others.

    Comment by KC — June 8, 2009 @ 3:27 pm

  6. Yes, I suppose in working for oneself it does make a difference, especially when you are the storefront and representative for your company. If you don’t work hard and have a good attitude in that case, you will suffer.

    Interesting that those attributes that benefit a small business owner are to some degree punished by big business and vice-versa, eh?

    Comment by Jeremy — June 8, 2009 @ 3:34 pm


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