Litigation

Airlines likely to increase fares due to ?congestion fees?

By Tracy Coenen

Last week I posted on WalletPop about a proposed “congestion fee” that airlines would have to pay at airports. Right now they pay a landing fee based upon the weight of the plane. With the congestion fee, they would instead pay a fee based upon the day of week, time of day, and congestion at the airport during landing. Simply put: During peak travel days and times, airlines will pay more for each plane they land.

Several comments have been left on the post, with readers generally arguing about why airlines charge so much to fly, why they’re not profitable, and what the lowly consumer can do about it.

One reader left this excellent comment that I think does a marvelous job of summarizing the problem with the U.S. airline industry:

Two issues were noted in previous posts:
(1) Airlines treating us like cattle because it maximizes their profits. (2) Airline costs are high because of labor costs.

Let’s address these problems - unions exist because labor organized to fight management abuses - many of them salary related. (And we all know cases of rotten management somewhere!) Businesses (in theory) exist to return profits to stockholders. Simplify the equation to a single boss and a single worker - a boss offers a salary for a given unit of work, and a worker offers work for a given unit of salary. If the worker asks for too much, the boss hires a different worker. If the boss offers too little, then the worker tries to find work elsewhere. Looking at the problem from the point of a single boss and worker, it’s simple….

But we are not looking at a simple equation. Workers are expecting pay scales based on airlines past successes. Airlines have costs imposed on them due to past regulations and contracts which no longer are sustainable. Government has not defined the markets in a way that natural forces check and balance both airline management and labor. Nor has it managed resources well (landing slots, transport to airports, etc.). Couple this with an American culture that rewards false economies (such as buying things at the lowest price without regard to quality), and we’ve seen air travel go to blazes.

How should we address this in a way to save real money, and yet use markets to our advantage? For me, it’s choosing not to use airlines for shorter trips. It also includes choosing my airports carefully (and I can do so in the NYC region), which may include driving out of my way to avoid airports with excessive congestion. If we start acting rationally, both airlines and their labor will start doing the same. And we may see realistic, sustainable, reasonably inexpensive fares with quality service return…..

I couldn’t have said it better. The airlines have a cost structure that they can’t support and real customer service is practically non-existent. How long can the airlines tread water?

I think a large-scale overhaul of the industry is necessary, but it will inflict great pain on the consumers while it happens. It may even require the airlines to “start over”… essentially completely overhauling their process and their sales force. While they do that, I expect that flights will be in short supply and prices will be very high.

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Full post as published by The FRAUDfiles Blog on January 21, 2008 (boomark / email).