Well We're at "Wits' End," Ya Corporate Welfare Whore!

Matt Welch | July 15, 2005

America's horrid "legacy airlines" -- the ones who have left a shameful "legacy" of billions and billions and billions in taxpayer bailouts, subsidies, loan guarantees, and targeted tax bouquets -- are back in Washington, hat back in hand. Here's a weepy op-ed from American Airlines chief Gerard Arpey, poignantly entitled "Help companies meet their pension obligations"; and this Dallas Morning News round-up (reg. or bugmenot req'd.) is full of cringe-worthy quotes, like this one from Legacy Airline capo James May:

"If you have some magic for $60 fuel, I would like to hear it, because we are at wits' end," Mr. May told senators.

How about, don't run a crappy airline? I just had a lovely week-long vacation nearly ruined by the book-ended incompetence of a certain legacy airline who forced me into an unplanned overnight stay in godawful Irving, Texas (sans luggage, of course) ... because bad weather in an absolutely unrelated part of the country left its hub airport short on available crew members. Seriously, what's the point of a hub-and-spoke system when you don't have flexible resources or a halfway decent Plan B at Worldwide HQ? And needless to say, for my second consecutive return flight from Dallas to LAX at least one piece of luggage didn't make the plane.

But luckily for the money-squandering dullards, there are enough members of the Senate Commerce Committee who apparently believe certain businesses are too colossally incompetent to fail:

The Commerce Committee's ranking Democrat, Sen. Daniel Inouye of Hawaii, agreed: "If we do not begin to solve the problems plaguing the air carriers, we will see more failures in coming months and certainly more jobs cut."

Because what is the federal government if not a guarantor of full employment at lousy companies?... If Inouye and his fellow hacks were serious, they could start by privatizing airports, allowing vigorous foreign competitors to own more than 50 percent of U.S.-based airlines, and letting the failures actually fail, for starters. But that would take a belief in free airline markets we haven't really seen since the Carter Administration.

Comments

|7.15.05 @ 3:35PM|#

If there's any doubt about unions being the sworn enemies of American taxpayers, let this remove it please.

...I understand the AFL-CIO represents more than 600,000 federal employees.

|7.15.05 @ 3:39PM|#

"But that would take a belief in free airline markets we haven't really seen since the Carter Administration."

Great line. You're going to blow a few gaskets with that one.

They should have let some airlines fail after 9/11, and spent the money helping the newly unemployed get back on their feet.

|7.15.05 @ 3:41PM|#

Oooh, Matt. Sorry about the Irving, Texas thing. I feel your pain.

|7.15.05 @ 3:46PM|#

They should have let some airlines fail after 9/11, and spent the money helping the newly unemployed get back on their feet.

Indeed.

It might have been even better if they had allowed some of the mergers that were denied on antitrust grounds before 9/11. Then some of the airlines would have had firmer foundations and might have survived the shock.

|7.15.05 @ 3:51PM|#

Southwest needs to find some pictures of congressman with farm animals, like the Legacy Carriers appear to have.

|7.15.05 @ 3:51PM|#

How about sending the people who effed up the pensions to jail, bankrupting the crappy airlines, and funding the pensions?

Something for everyone to hate.

|7.15.05 @ 4:01PM|#

When I was younger, I remember airlines like Eastern that actually went bankrupt and no longer exist.

What happened? To those days of allowing bad businesses to fail? I don't understand why its acceptable to bail these airlines out.

Also, is Southwest the only carrier that seems to know how to turn a profit? It seems that every time I turn around another airlines is struggling to turn a profit. Why keep a company going if its bleeding money?

|7.15.05 @ 4:05PM|#

If you really want to fill your airsick bag, read up on the bullshit American is spreading to keep Southwest from flying long-haul flights out of Luv Field in Dallas. Their argument seems to boil down to that if they have to compete with an efficiently run, profitable airline they're screwed.

www.bizjournals.com/dallas/stories/1996/07/29/editorial2.html

|7.15.05 @ 4:12PM|#

if they have to compete with an efficiently run, profitable airline they're screwed.

This strikes me as completely irrefutable.

|7.15.05 @ 4:23PM|#

Ralphus,

They were doing that since Southwest began. Read former Southwest-CEO Herb Kelleher's book. It's like "Tucker: A Man and His Dream" except Kelleher manages to thrive and the big inept corporations that tried to kill off their competitor are now playing the violins and crying poverty.

Methinks this doesn't bode well. I see an airline version of Amtrak in the offing.

|7.15.05 @ 4:25PM|#

A more recent article that details the current Wright Amendment fight.

http://news.yahoo.com/s/latimests/20050626/ts_latimes/battleatlovefield

from the article:

Because of its low fares, Southwest claims that lifting restrictions at Love would save travelers more than $700 million a year on flights to and from the Dallas-Fort Worth area, including $36 million in savings in the Los Angeles area alone.

Rival American Airlines, the nation's biggest carrier, disputes those claims, noting that airfares have been falling at Dallas-Fort Worth International in recent years and that Southwest's study failed to examine how it would affect fares at that airport if it moved there from Love.

.....

American contends that Dallas-Fort Worth and the North Texas area face disastrous economic damage if Southwest is free to fly anywhere from Love Field.

By seeking repeal, Southwest is trying to exploit its dominance of Love Field "after we, the community and others have continued to invest billions of dollars" at Dallas-Fort Worth, Gerard Arpey, chief executive of American and parent AMR Corp. told an investor conference this month.

The simple solution, he said, is for Southwest to shift all or part of its Dallas operations to Dallas-Fort Worth.

"They can start service tomorrow," Arpey said. Otherwise, "we will do everything we can to defeat" the law's repeal.

Besides American, Dallas-Fort Worth is pressuring Southwest to give up the fight and shift at least some of its service to the big airport. It has offered Southwest free rent for a year and $22 million in other incentives.

"We urge Southwest Airlines to abandon this divisive effort," Kevin Cox, Dallas-Fort Worth International's chief operating officer, said in a recent statement.

But Southwest said moving any of its operations there was a nonstarter. The airline prides itself on, in most cases, avoiding the biggest, most congested airports, a strategy it claims helps keep its costs � and fares � low.

|7.15.05 @ 4:32PM|#

Not to mention that DFW airport totally blows. That damn train has made me miss two flights, and you have to take it - there no option to walk (unless outside), that I could find.

|7.15.05 @ 4:35PM|#

I wonder of Bill Gates has ever thought of running Microsoft into the ground. That way, he could get a huge government bailout instead of Justice Department persecution.

|7.15.05 @ 4:38PM|#

Speaking of which, why didn't Enron get a huge government bailout?

|7.15.05 @ 4:39PM|#

ralphus' post refers to a noxious practice made possible by the fact that airports are owned by cities, counties, etc. The local government wants to expand the airport, build more concourses, etc. It uses its power to issue bonds to pay for it. Long-term contracts with one or another airline provide the anticipated revenue to pay off the bonds, which I believe can qualify as tax-free. Air Welfare Whore locates its hub there, and sub-leases spots in the concourse to other carriers, locking in a price advantage v. its competitors. If the airport managers wanted to bring in new carriers to increase competition, they'd be stabbing their favored "partner" in the back, after it essentially fronted the dough to build the place, by assuring the markets that the bonds would be backed by the promised rents. It all goes around in a circle. Combine that with special tax treatment for airlines HQ'd in a state, and there isn't much left to "free enterprise" in the "deregulated" airline business.

Kevin

|7.15.05 @ 4:43PM|#

Don,

It sucks for transfers, but they have a new sky tram thing that makes getting around a lot easier. DFW biggest plus is that it�s easy to fly in and out of. If Dallas is your final destination its a breeze. You�re off the plain and in a cab in no time.

A good airline could easily turn a dime out there. Southwest would do fine out of there. But why should they give up their competitive advantage just because American can't hang?

|7.15.05 @ 4:47PM|#

"Speaking of which, why didn't Enron get a huge government bailout?"

because algore didn't get to steal the election.

|7.15.05 @ 5:10PM|#

The comment above is right on-- DFW is great as a terminus...unless your return flight drops you on a different concourse from the one you started at (American flies out of 2 or 3 terminals there). Then you are on the 2 mph Train of the Future, which goes on an endless loop of the airport, and takes about a year to transport you from one terminal to another. And actually, even that horror has been largely replaced by the new high speed tram.

American and DFW released this big study a few weeks ago showing the crippling impact of lifting the Wright Amendment, but failed to include the part of the report that discussed how the cost of most flights into and out of the DFW metroplex would drop like a stone if SWA could fly wherever it wanted to out of Dallas. A spokesman for American said after the fact that they didn't think the public would be interested in that part of the report, and that was why they didn't release it originally. Such utter bullshit.

I live in Arlington, which is right next to DFW airport, so personally I would rather SWA fly out of there, but I think they should be able to do whatever the hell they want.

|7.15.05 @ 5:19PM|#

Gotta agree with ralphus on how easy it is to land at DFW and be on your way home.

But living about 15 minutes from Love Field with a wife whose family lives in California, that amendment really chaps my ass.

|7.15.05 @ 5:24PM|#

Airlines just need to be more creative in cutting costs. I suggest they follow the airports lead.

Last week while in the security line, someone spilled some coffee. Fortunately, my socks were there to soak up every last drop. Voila! No need for a cleaning crew.

Perhaps they could boost the p.s.i. on those air vents to clean out the planes, which would also, if the flow is strong enough, keep those pesky passengers in their seats and not messing up the bathrooms.

|7.15.05 @ 5:44PM|#

so the congress is saying that if these airlines fail all employees will lose thier jobs and will never work again. Intresting. So if we let them fail and sell the assets to fund the pensions, then no other airlines would be created or surviving airlines won't expand to provide the air service that was provided by these failing companies. I guess they wouldn't hire previous airline employees either. Granted, employment may drop overall in the airline business, but isn't that good if it enables the industry to become healthier, better to spend billions bailing them out every 4 years.
Why do these airline executives for companies (American Airlines, United) that recieve huge taxpayer bailout deserve to be paid millions. The US taxpayer is paying these guys millions in salary to run their companies at huge operating losses. At least cap their taxpayer provided salaries until they turn a profit and the shareholders can pay them.

M1EK|7.15.05 @ 5:57PM|#

"A good airline could easily turn a dime out there. Southwest would do fine out of there. But why should they give up their competitive advantage just because American can't hang?"

Well, for starters, because DFW was built as part of an agreement which included the closing to passenger service of Fort Worth's little airport and most of Dallas' little airport.

But we know libertarians don't really believe in enforceable contracts, so who cares, right?

|7.15.05 @ 6:18PM|#

Who agreed to what?

Because DFW negotiated a sweethart deal I should get fucked on fares and service?

|7.15.05 @ 6:31PM|#

Yes, ralphus, M1EK seems to think that two wrongs make a right. I need to call my second-grade teacher and tell her how American liberals have proven her wrong.

|7.15.05 @ 7:29PM|#

"Also, is Southwest the only carrier that seems to know how to turn a profit? Why keep a company going if its bleeding money?"

1. Horizon Air out of Seattle and many smaller regional carriers turn profits.

2. a) favorable bankruptcy laws make liquidation of assets unccessary b) airlines have existing government loan guarantees which make default impossible and incentivizes the government to continue to make new loans c) investors stick with the companies becauses of a) and b) waiting for profitability to return, as many of the carriers were okay in the 90's.

|7.15.05 @ 8:24PM|#

They should have let some airlines fail after 9/11, and spent the money helping the newly unemployed get back on their feet.

I predict this thread will not be everyone vs. Joe...

Lazlo|7.15.05 @ 8:49PM|#

The agreement to shut down other fields in the area wasn't made as part of an "enforcable contract," it was a subprovision of the 1968 bond ordinance Dallas and Ft. Worth put together to finance DFW. In that subprovision, the cities agreed to take the "necessary, appropriate and legally permissible" steps to relocate the region's air traffic to DFW. Problem was, there was no "legally permissible" way to force Southwest -- which didn't even start flying until 1971 -- to move to DFW. Oops.

After the Civil Aeronautics Board (which ordered the creation of DFW in the first place) lost most of its regulatory authority to the Airline Deregulation Act, Southwest moved to start flying interstate out of Love Field. But Speaker of the House Jim Wright -- who also just *happened* to represent Fort Worth, where American Airlines just *happened* to be headquartered -- started sticking anti-Southwest amendments onto any bill he could get his greasy paws on. He didn't have the juice to get any of them past the Senate, but he kept the threat of a federally-mandated shutdown of Love Field alive until he was eventually able to bully Southwest into accepting the four-state compromise that bears his name.

Using government power to arbitrarily cripple a legally-operating private business...yeah, that's something most libertarians can get behind...

Kevin Carson|7.15.05 @ 9:33PM|#

They could also deprive airport's of access to eminent domain, and let them include ALL costs in user fees as their only means of funding. Then we could go back to riding trains.

|7.15.05 @ 10:43PM|#

As a person who a) actualy lived in Irving texas, b) transferred baggage at DFW for said legacy airline, and c) is owed a pension from said airline, and who shares the same first name, let me say one thing....

... ya got a point. Or two.

|7.16.05 @ 3:49PM|#

But that would take a belief in free airline markets we haven't really seen since the Carter Administration.

I don't know much about air travel policy during the Carter Administration and how it differs from subsequent policies. Anybody care to enlighten me?

Matt Welch|7.16.05 @ 5:16PM|#

thoreau -- They abolished the Civil Aeronautics Board, and launched deregulation.

|7.17.05 @ 11:28AM|#

From Chrysler in the 70's, to First Boston in the 80's (?) to the gaggle of airlines, vaccine makers, on and on, CONgress has been happy to save those deemed 'too big to fail'; on our dimes of course.

Now, following the lead of steel and mining (?), the airlines and the auto makers will unite to unload pension obligations and then health care to the taxpayers' backs as 'that is the only solution to making us competitive'.

Management caved easily when times were good, never met obligations and now when the rain falls, demands our dough to save their feckless asses.

Time for AA, USAirways, Delta, and maybe a few others to join TWA,PanAm, Braniff in the crap can of business history.

David Rollins|7.17.05 @ 2:26PM|#

First Boston was bailed out in the 80s? I googled but could find no reference.

Curious as I work for them (I wouldn't expect the company to mention it).

Billy Beck|7.20.05 @ 12:43PM|#

Every frequent flyer knows that nobody ever flies into DFW.

You fly into Houston and taxi to DFW.