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 Up Front With Martin B. Deutsch

martin DEREGULATION'S FIRST VICTIMS

BY MARTIN B. DEUTSCH

December, 1980 -- Deregulation (also called regulatory reform) has been with us since the autumn of 1978. The deregulation of the U.S. airline industry is a fact of life that is unlikely to be reversed. Congress, in its wisdom, may at some time see fit to modify or change the ground rules, but a return to regulation in its historic form is unlikely. The clout of certain consumer interests is too powerful, too entrenched, for the politicians to risk its backlash, real or imagined.

And there is little question that many of our legislators and those in command at the Civil Aeronautics Board who jumped the deregulation gun were motivated by good intentions. The regulations that had ruled our commerce in the skies were an amalgam of crazy-quilt input over a period of nearly half a century by various concerned elements of the federal apparatus. We could criticize those in Congress and at the CAB who pushed deregulation for the acting in haste, for lacking expertise and sophistication, for their failure to look beyond the immediate public popularity of their actions, for tampering with a complex and unfamiliar industry. But it’s too late. Deregulation is here, in all of its confused and chaotic splendor, and we’re stuck with it.

It’s not only here on the domestic scene, but as an instrument of foreign policy we are also trying to impose it on friend and foe alike around the world. Sometimes by diplomacy, sometimes by the bludgeon. Whichever is the case, at home and abroad, let’s try to keep in mind that politicians and academicians are striving to bring the acknowledged principles of the free marketplace to the airline community. They thought they would be removing a straitjacket.

But, at the risk of repeating myself, deregulation is a reality for the airlines, their related industries and for the ultimate beneficiaries, the passengers.

How is the absence of regulation affecting the frequent flyer? There are many facets to the question, and we will continue to examine them regularly. Situations shift and change, and we expect to be on top of what’s happening in this critical area. Here and now we’ll look at just one of them pertinent points.

The “major effect” of deregulation, we are told by the National Passenger Traffic Association (NPTA), the association for corporate travel managers, is that the key U.S. air carriers have eliminated service to many smaller and medium-market cities, although flights on a number of routes have been replaced by commuted lines. For example, United has dropped many short-haul routes (200 miles or less) that were originally expected to feed into its long-haul flights from major hubs, “In case after case,” explains Richard Ferris, United’s chief executive, “between 70 percent and 90 percent of the passengers we carried in our short-haul routes from small and middle-size cities did not connect, with any other United flights, let alone out long-haul flights, where we can make a buck.”

That’s why such services are being reduced or eliminated. By the end of last June, United had ended all service to Bakersfield, Muskegon, Charleston, Chattanooga, Merced, Modesto, Salem, Stockton and Visalia, not to mention Atlanta and New Orleans.

And while the commuters are often filling the gaps, this trend is causing headaches, according to the NPTA. Why the problem? Many NPTA members are encountering resistance in getting “…their people to travel on commuters.” This is not only because of real or imagined concerns about the commuter safety (NPTA says in some cases business travelers are now switching from flying to driving for long-haul segments), but also because commuter schedule information is relatively hard to come by and to keep current. Many large corporate traffic departments now carry automated reservations units, such as Apollo or Sabre, but often they can’t book or obtain commuter schedule data through them.

Most of the commuters do not have computerized res systems of their own, so as business travelers become “more and more dependent (on them), they’re just not prepared for it.

The decline in service to other than large communities is just a tip of the iceberg. More critical issues involve the undeniable fact that the frequent flyer subsidizes the low-cost promotional fares, in return for which he may well encounter fewer flights on important routes and deteriorating quality in the way he’s treated, on the ground and in the air.

More to come.

This column originally appeared in Frequent Flyer magazine.

Copyright © 1980-2007 by Martin B. Deutsch. All rights reserved.