The Decline of the U.S Airline Industry, Defined

As the so called “decline” of the American airline industry continues the profit being reported from the airlines in 2012 was surprisingly good. Delta Airlines had a nice little rally on Wall Street and nearly all the major airlines reported some profit in 2012. However, the cries from the traveling public have not improved; in fact they are getting worse. This is most likely due to air fares going up in addition with the onset of new fees. It’s really a doubled edged sword. You see, the airlines need to make money and the traveling public doesn’t feel they should be paying an extra $25 to $50 for a round-trip ticket to grandma’s house. I won’t side with either; however, the airlines have a very valid argument. In fact, they really shouldn’t feel the need to justify their reasoning on hiking fares. Let’s remember, these are multi million dollar machines they are hurling through the air which requires expensive gas, maintenance and professional staffing. In order to keep these things safely air born, you need cash. Where do they get that cash? Not from selling a plane full of $200 round trip fares from JFK to LAX, I can guarantee you that. To fill up a Boeing 757 at the current cost of jet fuel, it would cost the airline $34,811. The airline would be lucky to make a $1000 profit on an LAX to JFK flight or to break even for that matter.


Historically speaking, the American airline industry has always had problems. We have seen countless airlines come and go, some big and some small. In general, if the world was suffering from a problem, the airlines would inherit some part of that problem, one way or another. That may not be the case in today’s world.


Pan Am was among the leaders during the glamorous days of commercial air travel, they launched the jet age in the late 1960s as well as becoming the first airline to fly the legendary Boeing 747, launching the era of the wide body jet. Pan Am set the bar for nearly every airline to follow. However, ultimately they eventually took on the burden of cash flow. As the world saw conflict, high oil prices, and a slowing economy, so did Pan Am. In 1991, after a series of financial setbacks and the 1988 bombing over Lockerbie, Scotland, the airline ceased operations. Experts say the bombing was the beginning of their fate as passengers began to see the airline as a terrorist target and moved on to Pan Am’s competitors. The Persian Gulf War added additional stress as oil prices skyrocketed. Pan Am was finished.


The story of Pan Am is just one example of how an iconic airline which seemed to have a never ending future can suffer a fatal blow in the blink of an eye. Contrary to popular belief, the airlines are far from the money grubbing, fortune 500 companies our popular culture might lead them on to be. They run a unique business like no other. Their survival relies on worldly components like current events, oil prices, the economy, regional conflicts, wars and numerous others problems. However, the passenger demand for a cheap ticket seems to be causing the most damage. Let’s imagine for a second that United Airlines, currently the world’s biggest airline, goes out of business because they couldn’t keep up with the public’s demand for a $200 round trip ticket. It sounds silly doesn’t it? Well, that is the reality of today’s airline industry.


Today, most passengers’ loath flying, likely because they know they are getting nothing special for the inconveniences of navigating busy airports, standing in long security lines and dealing with cranky gate agents and flight attendants not to mention, delays. Back in the more glamorous days of flying, people loved the opportunity to fly. They looked forward to boarding an airplane. They knew they would get a hot meal, friendly service, leg room and an overall pleasant experience, and they even dressed up in their Sunday’s best. The lack of those perks has long since passed. As the airlines were forced to cut back on those amenities, they continued by cutting back on jobs, staff salaries and retirement pensions in order to maintain survival. Rightly so, those cuts increased animosity among airline staff and management which ultimately reflects back on you, the traveling public.


Below is a fresh, realistic perspective from an airline pilot we know from one of America’s largest legacy carriers regarding the current state of the airline industry in the U.S. We wanted to know his opinion on it and the ultimate effect it is currently having on his profession.


I think there is a reasonable assumption that the public’s thirst to fly cheap is helping destroy the industry.  In the 1970s to fly from Visalia, CA to San Francisco a typical fare would have been $300.  And that’s in the 1970’s.  While the price of fuel has skyrocketed, although modern airplanes use less, now that same fare would be more than what it costs to fly from San Francisco to Boston.  And the consumer feels their still getting screwed on the price.


So airlines cut cost and service to match revenue, which “cheapens” what was once a great service experience.  Now, since there isn’t much revenue to differentiate an airlines product, travel has become commoditized.  Instead of selecting “Airline A” because of their superior service, now travel is largely a seat, a coke and a bag of peanuts industry-wide so the passenger looks at a grid of airlines and chooses the least expensive without much consideration of service, amenities or often, how many stops it takes to get to their destination.


The profession is affected because less revenue means fewer perks and a lighter paycheck.  Also, that lighter paycheck has dramatically reduced the number of people pursuing a career in professional aviation.  So with fewer people entering the profession, many deciding to leave for greener career pastures, the depth of experience is whittling away.


Granted the old wives tale is that the plane can fly itself, which it cannot, but the issue is decision making.  Less experienced pilots may manifest itself into bad decision making.  Poor decision making in the cockpit is a massive safety hazard.  I challenge the consumer to browse the archives at the NTSB and notice how many accidents and incidents result from pilot error.  Most, and we certainly should do what we can to attract the best and brightest pilots, and that takes compensation well “north” of what the industry expects to pay today’s aviation professional.


Management across the industry can address the issue by having an honest dialogue with the consumer.  If you want to fly from Des Moines to New York, here is a fare that reflects the actual cost of doing business.  Included in that fare is compensation for your cockpit and cabin crew, the support network of professional dispatchers, mechanics, flight controllers, ground personnel and the thousands of people behind the scene that form the team to have the jet at the gate, on time, fueled, lease-paid, cleaned and ready to take you to your destination.


The real cost of a cheap ticket is your safety.