Friday, September 30, 2005

American Airlines - Something Sane In The Air?

American Airlines announced today that they are cutting 15 round trips due to rising fuel costs. With one airline after another filing for bankruptcy, it is about time somebody had the common sense to reduce flights. There are simply too many seats in the air. In order to fill them, the airlines offer cheaper fares, often matching or undercutting competitors. But you can't make a half-empty plane profitable, and you have to accept that it is better to let another airline take some of your business than to continue losing money.

For example, a flight is being cut between Chicago O'Hare and Houston Bush Intercontinental. American has four round trip non-stops now. Look at next Monday's O'Hare departures. In addition to American's flights, United has six, Continental has ten, and US Airways has six. These flights are inevitably clumped together on the O'Hare schedule. Four airlines have flights leaving O'Hare around 8 AM. Three airlines have flights departing around 10 AM. Four flights leave around noon, three flights leave at 3 PM, and three flights leave around 5 PM. Do we real need this kind of redundancy? Am I missing something here? Granted, I am not privy to booking data, but this seems like a clear case of overcapacity (though maybe I'm biased because I don't care to ever return to Houston).

The bankruptcy troubles of the airline industry, which predate 9/11, are clear evidence that something is fundamentally wrong with the way they do business. Either they have too many underbooked planes or they don't charge enough for their tickets to make a profit (or both). If there were fewer flights available, each flight would carry more passengers. With tighter supply, the airlines could charge higher fares and be profitable. Then they wouldn't have to cry to the federal government for bailouts or screw their workers out of their pensions just to keep selling underpriced tickets. The free marketeers may preach that more competition is better for consumers, but I cannot see how the instability of the airline industry as it now operates is good for anyone, especially when it must be propped up by our tax dollars. I think American Airlines is making a smart move, and I hope other airlines will follow suit. It's too bad it took higher jet fuel prices to bring them to their senses.

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