The Washington Times reports that American Airlines is turning a slight profit. That's good, and what I would expect. Does this mean that they'll start paying back the $900 million in cash plus additional loan guarantees that the people of the United States gave the company two years ago? Not likely.
I'm not saying that it should be paid back, necessarily. I've wavered over whether or not the post-9/11 bailout of the airline industry was a good idea, but I tend to think it wasn't. Yes, many airlines would have gone out of business, but that would have been a good thing. It's not like the planes would just vanish, or even stop flying (most likely); the horribly mismanaged and poorly organized relics of the past century would likely have been reorganized and rebuilt using the more successful business models of Southwest and JetBlue.
One of the biggest advantages held by the later two airlines is that they only fly one or two types of plane. Pilot, air crews, and mechanics are normally only trained and certified on a single type of aircraft, and the older airlines' wide variety of different planes tends to push their labor costs through the roof. Having a variety of planes can save money if the most efficient plane for each length journey is always used, but such theoretical savings are never realized. On the contrary, the large fleets are not flexible enough to allocate planes in an optimally efficient manner, and they are terribly expensive to maintain. Planes and crews may sit idle because they are not compatible with each other.
Plus, the old airlines are built around business travellers, and with the tightened belts of the past few years even business travellers are scouring the web for cheap tickets.
In general, I think that we as a society need to be willing to let giant corporations fail, rather than bail them out. By my understanding, one of the reasons Japan's economy has stagnated over the past 15 years is because of government bailouts of unprofitable companies -- I certainly don't want America to meet that same fate. Failing companies will hit the stock market in the short-term, but once their assets are reallocated and restructured the economy will be better off from the gain in efficiency.
Can't use southwest or jetblue model if you want to compete internationally. The subsidization (and regulation) of airlines by this and every other nation is what causes a lot of these problems - southwest and jetblue get to avoid this by not flying internationally.
there is an article here in the economist a few weeks ago that I remember being very good about the problems with the international regulation of airlines. I'm not sure if its premium content or not.
Hm, interesting point. Why does international travel change the equation? Because the variation in trip distance is greater than for domestic flights? Still, it seems that the traditional model could be simplified somewhat, based on the newer models. I'll have to go read the article you link to.
It just changes the amount of governments involved, and therefore the type/level of regulation. This is not to say that JetBlue/Southwest do not do things the major carriers cannot do, only that there are other things to consider. The reality is that with an minimally-regulated global market, there would likely be a huge amount of consolidation between carriers, as lots of carriers everywhere are propped up by their governments, for various reasons. And, of course, this would all likely be beneficial for consumers. Mmmm, consumers
And the consolidation wouldn't be likely to result in a monopoly, it wouldn't seem like, due to geography.