Another “blue ribbon” panel to fix the airline industry

by Tom Johansmeyer on

It’s been a tough month year decade for the airline industry. In the United States, it’s lost $58.5 billion and cut 158,000 jobs. There never seems to be an answer, and news of an industry in jeopardy has become routine. So, .

But, it will be different this time. Transportation Secretary Ray LaHood says it will not be “just another advisory committee.”

On his Department of Transportation blog, LaHood writes, “I am not commissioning some report to fill space on my bookshelf. This committee will make a difference.”

He continues:

“Look, without a financially strong aviation industry, we will be unable to compete in domestic and international commerce. We could also fall behind in addressing our own infrastructure needs. So we must begin this important conversation in order to ensure a viable, competitive U.S. aviation industry.”

But, he has his work cut out for him, as does the advisory committee. The estimated price tag to fix the most vexing problems the industry faces is $20 billion. And, many of the recommendations from the last two panels were never implemented.

A new air traffic control system, based on GPS technology, is at the top of the list, but it’s years away. It could save us $40 billion a year in lower fuel and labor costs, not to mention trimming a lot a time from the 740 million people who take to the skies. But, the $20 billion price tag is frightening, especially for airlines that are perpetually behind the financial 8-ball. The other possible wallet belongs to the taxpayer. Anyone want to pay more?

Oh, taxes could go up again if new environmental legislation is passed, so buckle up for more.

On the subject of taxes, the airline industry gripes that it gets hit worse than liquor and tobacco companies (well, except maybe rollers of loose cigarette tobacco). This gives them even fewer financial options to improve equipment and service. For airline shareholders, Jim May, top dog of the Air Transport Association, puts the lost value at around $24.5 billion. Yeah, I spelled it because there’d be a lot of zeroes otherwise. Local and state taxes have gone up, applying even more pressure. But, the other side of this is that taxes are a fact of life for any company, and the airlines should suck it up and move on. Let’s face it: with the U.S. economy in its current state, nobody’s getting tax cuts anytime soon.

Foreign money, the airlines say, would make it easier. Right now, foreign investors’ abilities to invest in U.S. airlines are limited because of national defense considerations. But, this is probably a dated risk, according to Carlos Bonilla, who advised former President Bush (the recent one) on transportation matters. The airlines would still be subject to U.S. regulation, regardless of who owns them.

White House pushing for answers to airline industry woes

by Tom Johansmeyer on

The Obama Administration is taking a closer look at the airline industry with the hopes that something can be fixed. Transportation Secretary Roy LaHood is pulling together a panel that will investigate the problems the industry faces and hopefully come up with a solution. But, I don’t think anyone’s breath is being held.

The airlines are always swamped with criticism, with consumers unhappy about customer service levels, on-time arrivals and departures, the shrinking list of amenities and increasingly cramped conditions. Now, shareholders are speaking louder about declining revenues and profits. Employees are losing their jobs, and regulators and industry observers worry about continued safety violations, including drunk and distracted pilots.

Ultimately, LaHood’s goal is for the panel to put together “a road map for the future of the aviation industry.” The panel is being convened thanks in part to a push from the airline unions, the stakeholders worried most by the layoffs that have now become routine. According to The Associated Press, they believe the industry is “dysfunctional.”

Of course, it didn’t take the airlines to offer their thoughts ask for money — lots of it. They claim that radar technology that dates back to World War II isn’t as effective as a GPS-based alternative. The industry would love to see this upgrade … as long as the government writes the check. The FAA is already prepared to spend $15 billion to $22 billion on this effort, but there is an additional $14 billion to $20 billion currently sent over to the airlines. The upside would be reductions in airport congestion, fuel consumption and carbon emissions.

The Air Transportation Association (shockingly) thinks the taxpayers should pay the bill because the system would benefit the whole country. US Airways CEO Doug Parker wrote a letter to LaHood saying that the airlines simply don’t have the cash to meet their end of this.

Unfortunately, the airline industry has once again asked for money and not offered any solutions of its own. No suggestion was offered as to any of the other difficulties pertaining to the industry, and I tend to become suspicious when there is only one problem identified. It implies that everything could be fixed, in this case, with the replacement of radar air traffic control systems with GPS technology. We’re dealing with an industry that has lost credibility rapidly, so even if this one grand move would address ever gripe, large and small, a willing audience is unlikely to take shape.

[Photo by extremeezine via Flickr]

Airlines told to cough up the cash on lost luggage

by Tom Johansmeyer on

The Transportation Department is getting serious about lost luggage reimbursement. The department has told airlines that they can’t set arbitrary limits on reimbursement for the bags they lose – or items that they have to replace because of delays. Several airlines, the DOT says, will only pay for necessities that passengers buy more than 24 hours after they hit the ground without their bags. And, they limit their willingness to pay to outbound trips. So, if you’re on your way home, you may get stuck with the tab.

The fed’s regs put the airlines on the hook for up to $3,300 per passenger on domestic flights for expenses resulting from lost or delayed luggage.

The Transportation Department is going to monitor the situation for 90 days, it says, then take enforcement steps against airlines that don’t play ball. One airline, the DOT disclosed, was fined last month for only footing the bill on outbound trips and only for items bought after that first 24-hour window after passengers landed.

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International visitor spending down 20%, misses $10bn mark

by Tom Johansmeyer on

Visitors to the United States from other countries spent a mere $9.6 billion in July, down almost 24% year-over-year, according to data from the Department of Transportation. Currency exchange rates continue to make a recession even more … ummm … recessed(?) for the travel business. So, we’re looking at nine consecutive months in which tourists from overseas just aren’t plunking down the cash they did last year.

The price paid to travel – called “passenger fare receipts” – plunged 26% from July 2008 to July 2009, with only $2.1 billion spent to get from Point A to Point B and back. This is the lowest level reached for passenger fare receipts in two years. Travel receipts – i.e. the purchase of travel-related goods and services – amounted to $7.5 billion for the month. This is the cash spent on food, lodging, entertainment gifts, and it’s down 23% year-over-year.

The fact that July was the ninth month in which international tourist spending fell masks an even greater problem: this trend has been gaining momentum. In November 2008, foreign visitor spending was off 4% from November 2007. By January 2009, the year-over-year change fell to -6% and -10% in February. May, June and July all posted travel export declines of worse than 20%.

For the year so far, travel exports (same thing as spending by foreign visitors) has reached $69.2 billion – a decline of 17% relative to the same period last year. What’s this mean? People visiting the United States have spent $13.9 billion less than they did last year.

But, in the spirit of fairness, we’re spending less when we leave the United States. American travel imports are down almost 13%. We’ve spent $8.3 billion less than we did last year. But, we still shelled out a total of $57.5 billion in “support” for the local economies we’ve visited in 2009. The United States is still sitting on an $11.7 billion trade surplus in the travel space – but the balance is $5.7 billion less favorable than it was last year.

Spirit Airlines receives record fine for mistreating passengers

by Scott Carmichael on

A quick search for past posts about Spirit Airlines here on Gadling shows not much more than negative news.

Sadly for Spirit, today’s news is no different. The low cost carrier was handed a $375,000 fine by the Department of Transportation for the way it treats its passengers.

The fine is a record, but the violations also appear to be pretty nasty. They include:

  • False fare advertising
  • Failure to provide compensation on oversold flights
  • Failure to provide baggage compensation claims in a reasonable time frame
  • Failure to accept liability for missing baggage items
  • Failure to retain copies of customer complaints
  • Failure to file customer complaint reports

Spirit Airlines blames their “growing pains” for all these issues, and insists that they are a thing of the past. Of course, when you are selling $9 tickets, you are bound to have cut some corners here and there.

As the lowest cost carriers move towards the “service not included” methodology, customers are always going to find something worth complaining about. Whether or not the issues are indeed a thing of the past remains to be seen, and I’m sure the DOT will be keeping a close eye on their operations.

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