Wise words from Alan Greenspan

Greenspan to the Joint Economic Committee

    “The earnings of the airline industry since the turn of the last century is zero and that tells you that structurally something is askew here and we need to address this in a manner which makes them far more viable,”

    “The technologies are just remarkable, it’s hard to believe that an industry that sophisticated is unable to make an adequate rate of return,”

He’s really hit the nail on the head. The answer to the problems facing the airlines is not one bailout after another. It’s real competition, both here and abroad.

The extent to which aviation is wrapped up in government is not nearly understood. It began with the Wright Brothers who immediately sought government subsidies for their new invention but it did not end with deregulation.

Airports in the U.S. are still controlled by governments, and lease availability and rates are determined politically. Air traffic control is still an inefficient government monopoly. Foreign ownership in a U.S. carrier is limited to 25%, and foreign airlines are not permitted to fly point to point within the U.S.

But it’s even worse than that! Protections and subsidies are hudden throughout government. I only recently learned about federal procurement rules that require government travelers to fly domestic carriers overseas even when it’s far more expensive. And government spends a whole lotta money on travel!

The airlines even support foreign aid because it means foreign travel, the revenue from which the aid agencies guarantee to those airlines in return.

Greenspan has identified the problem. The solution is that the airlines need to face the same marketplace as other, more profitable, businesses if there’s any hope of good service to consumers and value returned to shareholders.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community Milepoint.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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