Bill Saporito is an editor at large at Inc. magazine.
What $50 billion in taxpayer aid for airlines did not fix
And yet we’re paying more to get there. Delta just said it expects revenue in its September 2022 quarter to top the same period in 2019 despite a reduction in capacity of 15 percent to 17 percent. Yields, which is the industry’s phrase for profit per seat mile, are rising. So are passenger complaints to the Federal Aviation Administration, which earlier this year were running 200 percent higher than pre-pandemic levels — overwhelming the agency’s ability to process them.
In the middle of this mess, low-cost carrier JetBlue is spending $3.8 billion to buy ultra-low-cost carrier Spirit Airlines. That’s money that won’t be invested in the product. These are two carriers that have demonstrated a lack of aptitude when it comes to maintaining a schedule. Putting two clown cars together simply makes the circus parade longer.
Airlines have issued their standard apologies for our summer of seething — but during the pandemic, the industry had the opportunity to restructure itself, using some of the $50 billion of taxpayer money that 10 airlines got from Uncle Sam. There were decisions to be made over the jets they fly, the places they fly to (or don’t), the employees they keep (or don’t) and the fees they charge. Rethinking this could have changed our experience for the better.
What the airlines chose to do instead has largely benefited the airlines. Those choices help explain why more than 2,800 flights were canceled over Memorial Day weekend. “The flying public is expecting a good level of service from an airline sector we all rallied to make sure was saved,” noted Transportation Secretary Pete Buttigieg. Although Buttigieg has done some browbeating and minor rulemaking, he hasn’t made much of a dent in the dreadful service.
And things could get worse. A pilot shortage could further trim flight schedules, leaving even fewer options. North America is projected to be short over 12,000 pilots by the end of this year. This is not a surprise: The industry has known for nearly a decade, when 1,500 hours became the minimum federal requirement to sit in the pilot’s chair, that it needed to train more people to fly airplanes.
During the pandemic, workforces had been downsized drastically, largely through voluntary retirements. Nearly a fifth of Delta Air Lines’s workforce retired during the pandemic, and this year the company has been frantically hiring to restore service.
Even the improvements come with caveats. If you like new jets, this is your summer to fly. In 2019, the sky was a flying junkyard as carriers delayed scrapping their oldest, most inefficient jets because business was too good. The pandemic prompted a retirement rush, with hundreds of 25-to-30-year-old jets sent to the boneyard to be replaced by new models such as the Airbus A200 and the Boeing’s 737 Max.
New and bigger jets don’t mean more room for us, though. Allegiant’s new 186-seat A320neo, for instance, replaces a 177-seat version. These new jets are more about making the economics more comfortable, not you. Conversely, many 50-seat commuter aircraft have been retired because they’re unprofitable or there’s no one to fly them. As a result, many smaller markets have lost air service.
In most consumer businesses, innovation normally improves the customers’ lives. In the airline business, innovation often means something else. A dozen years ago, carriers introduced “unbundling” — the fee-for-every-amenity concept that, in effect, reduces the basic seat price while generating offsetting revenue for window seats, leg room or bags. But unbundling has reached absurd levels, with so many options around security line and boarding order priorities, seat location and access to overhead bins that pricing has become a shell game, wrapped inside a puzzle, dressed up as farce.
The worst part about flying is what hasn’t changed: Your flight from New York City to Chicago is still scheduled at 2 hours and 45 minutes when the actual flight time is two hours because the industry still expects things to go wrong. And yet, because the carriers invest little on backup aircraft, the entire system can dissolve into cascading chaos with a single weather event.
Why do the airlines persist in running a business model designed to disappoint? Because they have little incentive to change. North American carriers should make a combined $8.8 billion in profit this year, according to the International Air Transport Association.
Taxpayers paid $50 billion during the pandemic to keep airlines afloat. We thought we were going to get an upgrade. Maybe we should ask for a refund.
Source: WP
