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Thursday, July 10, 2008

Open Letter From Airlines

See the letter here

It's a great letter.  I actually totally agree.  As a frequent traveler, I have been following the airlines' misery very closely.  The airline industry is in sad, sad, sad shape.  There's a few points here though...

First of all, many airlines (I'm looking specifically at you, American, United, US Airways & Delta) have gone well out of their way to make a LOT of their customers unhappy.  They've increased fees for services that were previously free instead of just raising fares (which frankly I would have found more excusable).  They've off shored their customer service departments and treated their employees poorly - and those employees have gladly passed their bad moods on to their customers.  They've faltered on their safety inspections so much that they had to cancel flight after flight.  They've lost luggage, delayed and canceled flights, left people stranded for days in who knows where without compensation...  I could go on and on.

The point is, while they're right and I totally agree with them, they're going to have a hard time going to their customers now for help.  I'm not about to give American Airlines much sympathy at this point.  Continental is even hanging by a thin thread in my book as I watch my flights to Bonaire and Belize carefully to  make sure they don't end up canceled or rescheduled in an unacceptable manner.

It's more than airlines, though, so I hope that those that take the time to read the letter put aside their issues with the airlines for a second and look more closely.  As much as I'd like to jump up and down, overjoyed that an increase in gas prices are causing increased interest in more fuel-efficient cars, I still firmly believe that prices increasing at the rates we've seen are BAD.  Bad for the economy, and I wouldn't say necessarily good for the environment.

Negative things:
  • Increased costs, of EVERYTHING, not just gas, from groceries to clothing to non-essentials for a country that already has an awful lot of poor people who can't afford more.
  • Increased travel costs, leading to fewer travelers, when the airlines were already in a miserable position.
  • Less jobs, as businesses fail (how much good does better gas mileage do for you when you don't have a job to drive to??)
  • Increased costs for manufacturing, potentially leading businesses to cut corners in materials and methods that could potentially HARM the environment.
  • Folks running out and buying new cars, which is good for the economy, but questionable if it's good for the environment... since the materials and energy that go into making a new car burn oil, too.  Plus, what is happening to the old cars?*
  • Hmmm, people lose jobs, plus prices are rising, plus the nation is in a credit crisis, maybe prices drop because demand drops, but with oil speculation being what it is, will that actually happen?
Anyway, I'll stand behind the oil companies on this one.  At least gas prices have leveled off for a little while (at least for now).  I'm ok with them staying at $4 per gallon, but please don't let them go higher for a while...

*On a related note, one thing we've discovered about the Cayman Islands is that there is no reasonable way to dispose of unwanted used cars.  So, the islands are overrun with old rusted out cars and no way to get rid of them...  Very sad.


Wacky Neighbor said...

1. I don't know what role speculation and market manipulation is playing in the recent increase in oil prices (although, let's not forget that OPEC is a cartel and certainly takes steps to control supply and price, which isn't even mentioned in the letter). My guess would be some, although I also think that it's likely some of this "speculation" is money coming out of the U.S. stock market (which has been doing pretty badly) and into commodities, especially oil. At the same time, a significant portion of the increase in oil prices is directly related to the falling value of the dollar. For what it's worth.

2. It seems to me that, as far as the airline business goes, the price of jet fuel would have to be a major source of risk (somewhere up there with catastrophic accident). I'm sure that the airlines aren't exactly flush with cash, but I am surprised that more airlines didn't invest in some hedge against rising fuel prices - either locking into future contracts or even investing in oil futures or derivatives - to try to offset a run-up in prices. Maybe they all did and just didn't do it enough, I don't know.

3. Any sort of significant short-term change like this is bad for the economy. There are some things you can adjust in the short-run (how many times you eat out a month, number of hours of overtime to run a factory, number of workers to hire, etc.) but there are a lot that are only long-run (what car to buy, where to live, building a new factory, capital investments, etc.). We're going to have to make long-run changes, which are achievable, but it's going to be rough in the short-run.

Nick said...

I think that the airline industry as it currently exists will probably disappear.

Now things can go two ways:

Re-regulation with government subsidies.


A drastically smaller industry with higher fares, fewer flights and fewer airlines.

I'm thinking the second option is more likely. Which means that there will be a change in the way americans travel. Look for trains to take on a lot more of the load for interstate travel.

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