Rant on.
It isn’t lost on me that the airline industry in the United States has been a financial basket case for most of its existence. We all know the quip from Warren Buffet about investors being better off if Orville had been shot down. đŸ™‚ I’ve been reading a lot of news articles about Delta’s fairly stellar earnings announcement yesterday. We’ll let that pesky little fuel hedging mark to market thing by for now. To a tee, the headlines have taken one of just a few tracks with the focus mainly being something like this (paraphrasing):
- Cheaper jet fuel won’t mean lower airfares
- Profits flowing to bottom line, not consumers
- Airlines paying down debt and returning cash to shareholders
- Profits going to pension plan
There’s a lot of bloviating about airfares being high and fuel being “cheap” and a few explanations here and there about market forces and whatnot and why airfares aren’t coming down. There’s also a little righteous indignation expressing dismay that airlines are maximizing profits. No sheet sherlock! I mean why would a profitable business behave like….a profitable business? Because we’re talking about airlines, that’s why. I’ve yet to read any articles wondering why FedEx hasn’t lowered shipping rates (maybe they have), or the cost of a postage stamp hasn’t gone down since it costs less to fuel the mail truck. Adjusting to a new paradigm with airlines is proving difficult.
Yes indeed, America poured a lot of cash into airlines when times were bad, especially so right after 9/11. I haven’t forgotten loan guarantees, reimbursements for the closed air traffic control system, the layoffs, the pension losses, etc. I haven’t forgotten a thing. Nor have I forgotten this – until a short few years ago, has there been any other industry where so much wealth has been transferred from the pockets of shareholders, the companies they own, and the people they employ into the pockets of consumers than that of the U.S. airline industry in the last 30 years or so, especially since 9/11/01? The pendulum has swung. We’ll get back to balance. But barring something very, very catastrophic, I doubt that balance looks anything like the basket case years. We’re all going to have to get used to it.
Rant off.
-MJ, January 21, 2015
Image courtesy of Shutterstock.com
[…] Airlines as the Welfare State […]
Bryan,
It’s only disingenuous if I don’t say “rant on/rant off.” ;P Thanks for sharing your thoughts!
MJ
Marshall,
This is a bit disingenuous. The government has allowed airline consolidation to such an extent that the natural competition that would force supply to meet demand and set prices at a rational price is not working. Airlines tried all kinds of anti-competitive things in the last 30 years to keep prices high and often they were caught. Now with only three big airlines and a few smaller ones, of course we are seeing prices rise. Little competition.
Kind of odd that there is more competition and lower prices in Europe than in the US.
Bryan