5 ms·

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 indu

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
        They were privatized (formerly funded with toll bridge dollars), had service cut, and roundly failed to make a profit and are probably being transferred to another company. My point was that privatization is not some golden age all these services started out with like in WA.
        WalterBright 7y ago
        The free market is what works, privatization doesn't necessarily mean a free market was allowed.
  - 7y ago
- chipotle_coyote 7y ago
  I hadn't heard of this, so I just looked it up, and it's an interesting story! However, it seems a bit more complicated than just "big government muscled out the little guy and screwed everything up." The "mosquito fleet" you referred t was apparently down to only two companies by the early 1930s, and down to one by the end of that decade. At that point, the ferries were already a de facto monopoly. Saying the ferries were "nationalized" makes it sound like the government forced a bunch of operators -- or, well, that single operator -- to quit and just took over their business, but again, it looks like it's a bit more complicated than that. That remaining operator, the Puget Sound Navigation Company, got into a big fight with their union when they were demanding higher wages -- and the one point the state can be blamed for in this original saga is that they refused to let the operator raise their fares, although they were largely responding to public demand, according to the Seattle Times in 1951 (when this happened): the public didn't actually like that private operator, and thought they had raised their fares too much over the past decade while providing increasingly worse service. PSNC decided not to restart service, and the state offered to buy them out -- again, not what most people would call "nationalization." If the state did a bad job running the ferries for the subsequent decades up until about the 2010s, there's no immediately accessible litany of complaints I can find. An investigation in 2017 seems like it's led to a lot of accusations about how the ferry service's labor costs had been managed since 2012. In any case, this is fascinating history -- but it doesn't seem like a resoundingly knockout argument for "private monopoly good, government-run service bad."
  - WalterBright 7y ago
    Take a look at the size of the losses the ferries run at. The government forced the private ones out of business by setting fares, rates, schedules, routes and pay. It didn't add up.
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".

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
        They were privatized (formerly funded with toll bridge dollars), had service cut, and roundly failed to make a profit and are probably being transferred to another company. My point was that privatization is not some golden age all these services started out with like in WA.
        WalterBright 7y ago
        The free market is what works, privatization doesn't necessarily mean a free market was allowed.
- 7y ago
chipotle_coyote 7y ago
I hadn't heard of this, so I just looked it up, and it's an interesting story! However, it seems a bit more complicated than just "big government muscled out the little guy and screwed everything up." The "mosquito fleet" you referred t was apparently down to only two companies by the early 1930s, and down to one by the end of that decade. At that point, the ferries were already a de facto monopoly. Saying the ferries were "nationalized" makes it sound like the government forced a bunch of operators -- or, well, that single operator -- to quit and just took over their business, but again, it looks like it's a bit more complicated than that. That remaining operator, the Puget Sound Navigation Company, got into a big fight with their union when they were demanding higher wages -- and the one point the state can be blamed for in this original saga is that they refused to let the operator raise their fares, although they were largely responding to public demand, according to the Seattle Times in 1951 (when this happened): the public didn't actually like that private operator, and thought they had raised their fares too much over the past decade while providing increasingly worse service. PSNC decided not to restart service, and the state offered to buy them out -- again, not what most people would call "nationalization." If the state did a bad job running the ferries for the subsequent decades up until about the 2010s, there's no immediately accessible litany of complaints I can find. An investigation in 2017 seems like it's led to a lot of accusations about how the ferry service's labor costs had been managed since 2012. In any case, this is fascinating history -- but it doesn't seem like a resoundingly knockout argument for "private monopoly good, government-run service bad."
- WalterBright 7y ago
  Take a look at the size of the losses the ferries run at. The government forced the private ones out of business by setting fares, rates, schedules, routes and pay. It didn't add up.

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".