6 ms·

Is it really that bad if some airlines fail? That whole industry really needs to be restarted IMO. Their assets would be purchased at a major discount by others

Is it really that bad if some airlines fail? That whole industry really needs to be restarted IMO. Their assets would be purchased at a major discount by others who would likely create new airlines, or you might potentially see the healthiest ones consolidate the market (which wouldn't be the best outcome). Also, why isn't there consideration for nationalization of one of these failed airlines rather than giving them tax payer money even as a loan?

the_reformation 7y ago
This essentially happened after 9/11. We saw broad consolidation into the Big Three. The argument was that the restructuring meant we'd finally have an air industry with structurally bigger margins. This was sorta true- during a bull market. Ultimately, I think large scale personal air travel (or mass transit in general) isn't feasible in all economic climates. By definition, it's high upfront costs and low margins. The only airlines who seem to always make it work are regional and shuttles between high-income cities (Alaska, JetBlue.) As for why don't we just nationalize them, I'd say we de facto have already. Airlines know bankruptcy-level downside is covered by the government. It's not all bad though; there's an argument to be made that this system is pareto efficient. During bull times, you want private operators pushing for network expansions and price efficiencies, even if that means levering up. But these are a de facto utility, so having the government pinch their nose and cover the downside in a bear market is an efficient use of dollars. You could try and put in regulation to force them to reserve X months (years isn't realistic) of operation costs, but you can't get around the basic unit economics of the problem: planes are expensive, even if they're grounded and don't make money if they can't fly.
- rafiki6 7y ago
  I like that you mentioned they're a de facto utility. Utilities tend to also be natural monopolies. They usually tend to be government owned and operate at arms length. They also tend to be heavily heavily regulated.
- WalterBright 7y ago
  > As for why don't we just nationalize them Washington State nationalized the ferries, and they now run at massive losses a system that used to run at a profit.
  - vkou 7y ago
    The public roads in Washington State run at massive losses, yet we don't blink an eye at it - why should we treat ferries any differently? For anyone living on an island, they are the only 'road' in or out.
    - WalterBright 7y ago
      > why should we treat ferries any differently? Because history shows they can be run at a profit with the same fare, at no cost to the taxpayers. > For anyone living on an island, they are the only 'road' in or out. Evidently this wasn't a problem when the system was a "mosquito fleet" of private ferries.
      - colejohnson66 7y ago
        > Because history shows they can be run at a profit with the same fare, at no cost to the taxpayers. So can highways; Private toll roads are a thing. Doesn’t mean the National Highway System is bad.
      - selimthegrim 7y ago
        The ferries in New Orleans would like a word with you.
        samatman 7y ago
        Do you think even a full 1% of readers have any idea what you're talking about? I doubt it. If you have a point to make, make it.
        selimthegrim 7y ago
- a3n 7y ago
  > But these are a de facto utility, so having the government pinch their nose and cover the downside in a bear market is an efficient use of dollars. If that's the case, then it wold be more efficient to remove the "de facto" and operate as the reality.
  - outlace 7y ago
    I think its still better to have some competition between a few private airlines (even if de facto subsidized by gov't) as opposed to one behemoth national airline that faces no competition and therefore has no incentive to innovate.
    - Ericson2314 7y ago
      I don't care if airlines innovate. I want rail to innovate. Airlines should be obsoleted. Build a train across the Bering straight and through Greenland.
    - jessaustin 7y ago
      You haven't flown on any of the Asian national carriers, have you? They are all better than any American carrier. They are all better value than any American carriers other than the "discount" brands like Southwest. USA domestic air travel would improve dramatically if they were allowed to compete here. https://www.singaporeair.com/ https://www.singaporeair.com/ https://www.qatarairways.com/ https://www.qatarairways.com/ https://www.koreanair.com/ https://www.koreanair.com/ https://www.jal.com/ https://www.jal.com/ https://www.malaysiaairlines.com/ https://www.malaysiaairlines.com/
  - hosteur 7y ago
    Agere. And also remove the part where the profits are sucked out to other parties when things go well.
  - SilasX 7y ago
    I think there's a middle ground: allow them to compete as private businesses but require that they contribute some fraction of revenues into a common pool that pays out refunds and wages for a few months if a major travel-halting emergency happens. That is, make it so they can't compete on "whether they anticipated a global catastrophe".
projektfu 7y ago
I’d hate to see what the market looks like after that level of consolidation.
unstatusthequo 7y ago
Maybe the only thing worse than consolidation is nationalization. Welcome to GovAir. It would be worse than Spirit Airlines. Ugh
mr_toad 7y ago
> Also, why isn't there consideration for nationalization of one of these failed airlines rather than giving them tax payer money even as a loan? Once you have a national carrier they want bailout after bailout. Politically it looks bad to let your national airline fail, and they know it.
wtmt 7y ago
I'm not an expert in this area, but I don't see nationalization as the best answer. If you have a government that can handle airlines better, then it could be considered. In India, Air India is the nationalized carrier. The amount of taxpayer money it has wasted while providing substandard services is truly appalling. I think it's better to let certain businesses just fail and deal with the effects of those failures than propping them up through unsustainable means. In any case, the people working in the industry would need some sort of support from society.

the_reformation 7y ago

This essentially happened after 9/11. We saw broad consolidation into the Big Three. The argument was that the restructuring meant we'd finally have an air industry with structurally bigger margins. This was sorta true- during a bull market. Ultimately, I think large scale personal air travel (or mass transit in general) isn't feasible in all economic climates. By definition, it's high upfront costs and low margins. The only airlines who seem to always make it work are regional and shuttles between high-income cities (Alaska, JetBlue.) As for why don't we just nationalize them, I'd say we de facto have already. Airlines know bankruptcy-level downside is covered by the government. It's not all bad though; there's an argument to be made that this system is pareto efficient. During bull times, you want private operators pushing for network expansions and price efficiencies, even if that means levering up. But these are a de facto utility, so having the government pinch their nose and cover the downside in a bear market is an efficient use of dollars. You could try and put in regulation to force them to reserve X months (years isn't realistic) of operation costs, but you can't get around the basic unit economics of the problem: planes are expensive, even if they're grounded and don't make money if they can't fly.

rafiki6 7y ago
I like that you mentioned they're a de facto utility. Utilities tend to also be natural monopolies. They usually tend to be government owned and operate at arms length. They also tend to be heavily heavily regulated.
WalterBright 7y ago
> As for why don't we just nationalize them Washington State nationalized the ferries, and they now run at massive losses a system that used to run at a profit.
- vkou 7y ago
  The public roads in Washington State run at massive losses, yet we don't blink an eye at it - why should we treat ferries any differently? For anyone living on an island, they are the only 'road' in or out.
  - WalterBright 7y ago
    > why should we treat ferries any differently? Because history shows they can be run at a profit with the same fare, at no cost to the taxpayers. > For anyone living on an island, they are the only 'road' in or out. Evidently this wasn't a problem when the system was a "mosquito fleet" of private ferries.
    - colejohnson66 7y ago
      > Because history shows they can be run at a profit with the same fare, at no cost to the taxpayers. So can highways; Private toll roads are a thing. Doesn’t mean the National Highway System is bad.
    - selimthegrim 7y ago
      The ferries in New Orleans would like a word with you.
      - samatman 7y ago
        Do you think even a full 1% of readers have any idea what you're talking about? I doubt it. If you have a point to make, make it.
        selimthegrim 7y ago
a3n 7y ago
> But these are a de facto utility, so having the government pinch their nose and cover the downside in a bear market is an efficient use of dollars. If that's the case, then it wold be more efficient to remove the "de facto" and operate as the reality.
- outlace 7y ago
  I think its still better to have some competition between a few private airlines (even if de facto subsidized by gov't) as opposed to one behemoth national airline that faces no competition and therefore has no incentive to innovate.
  - Ericson2314 7y ago
    I don't care if airlines innovate. I want rail to innovate. Airlines should be obsoleted. Build a train across the Bering straight and through Greenland.
  - jessaustin 7y ago
    You haven't flown on any of the Asian national carriers, have you? They are all better than any American carrier. They are all better value than any American carriers other than the "discount" brands like Southwest. USA domestic air travel would improve dramatically if they were allowed to compete here. https://www.singaporeair.com/ https://www.singaporeair.com/ https://www.qatarairways.com/ https://www.qatarairways.com/ https://www.koreanair.com/ https://www.koreanair.com/ https://www.jal.com/ https://www.jal.com/ https://www.malaysiaairlines.com/ https://www.malaysiaairlines.com/
- hosteur 7y ago
  Agere. And also remove the part where the profits are sucked out to other parties when things go well.
- SilasX 7y ago
  I think there's a middle ground: allow them to compete as private businesses but require that they contribute some fraction of revenues into a common pool that pays out refunds and wages for a few months if a major travel-halting emergency happens. That is, make it so they can't compete on "whether they anticipated a global catastrophe".

projektfu 7y ago

I’d hate to see what the market looks like after that level of consolidation.

unstatusthequo 7y ago

Maybe the only thing worse than consolidation is nationalization. Welcome to GovAir. It would be worse than Spirit Airlines. Ugh

mr_toad 7y ago

> Also, why isn't there consideration for nationalization of one of these failed airlines rather than giving them tax payer money even as a loan? Once you have a national carrier they want bailout after bailout. Politically it looks bad to let your national airline fail, and they know it.

wtmt 7y ago

I'm not an expert in this area, but I don't see nationalization as the best answer. If you have a government that can handle airlines better, then it could be considered. In India, Air India is the nationalized carrier. The amount of taxpayer money it has wasted while providing substandard services is truly appalling. I think it's better to let certain businesses just fail and deal with the effects of those failures than propping them up through unsustainable means. In any case, the people working in the industry would need some sort of support from society.