A Chicago Tribune piece predicts

A Chicago Tribune piece predicts that United’s bankruptcy will help drive down labor costs across the industry and places the blame for the industry’s current woes on a legacy inherited from the days of regulation.

    Many of the most onerous work-rule provisions date to the 1970s, when airlines had to fill only 55 percent of their seats to earn an 11.5 percent profit that was guaranteed by the Civil Aeronautics Board. As a result, there were few restrictions on the costs that the board allowed to be passed through to customers.

I’m a bit undecided about this thesis. On the one hand, little has changed in the way airlines relate to their workforces since the regulated era. Moreover, labor-management relations are still highly regulated by the Railway Labor Act. The federal government has also consistently gotten in the middle of airline labor disputes. On the other hand, it’s been nearly 25 years since deregulation. I’m not sure how much blame can be placed at the feet of the federal government.

I think I’m inclined to place the blame more broadly: at the municipalities that control the airports, at the federal government which until this year classified air traffic control as a function which was “inherently governmental,” and excessive taxes on air travel.

All of this governmental foolishness shouldn’t overshadow one thing: that most of the major airlines have made incredibly bad business decisions that have destroyed billions of dollars in shareholder value. All of the government activity has come as very little surprise. Most of it, no matter how pernicious, is part of the operating background for the industry. If management didn’t think it could create value in that environment, it shouldn’t have continued to operate. Since airline management did continue, the blame ultimately falls at their own feet.

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 InsideFlyer.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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