The Downfall of a Short-Term Society

Last week, like many other travelers, my wife went on a business trip. Also, like many other travelers, she experienced the trip from hell. After three hours en route, her first flight was put in a holding pattern over west of Charlotte, N.C., for another two hours, because of thunderstorms, then landed at Greensboro, where it sat on the tarmac for an hour until a gate that could refuel the plane was available — except the gate where the plane was parked didn’t have that capability, and the plane had to wait for yet another gate. Some four hours later, she finally arrived in Charlotte at 2 a.m, for a connecting flight that had left four hours earlier. The next available flight left at 7:15. She was there, two hours early for security, only to be told that, because the same crew that had flown them in late was the crew to take them to Nashville, the flight would be delayed three hours to meet federal turn-around-time standards. And, oh yes, even though she’d called the hotel and asked them to hold her room — and that she’d pay for it, the hotel canceled her reservation, and she had to commute to the conference from another hotel. The return after her conference in Nashville wasn’t much better. First, because she had picked up some scholarly materials at the academic conference, her suitcase was ten pounds overweight — an additional $50 fee. Then, without the excuse of weather, her flight to Dulles, for a connection to Las Vegas [which is a 3 1/2 hour drive from our house] was an hour and a half late, causing her to miss her connecting flight. She was rebooked through Los Angeles, some 200 plus miles west of Las Vegas, and arrived in Las Vegas five hours late — and her luggage didn’t make it, even though it made it to L.A. and there was a two hour layover in L.A. So it had to be sent to our house arriving another day later. She finally arrived home some 24 hours after she first left for the airport after being up all night, twice in a week.

Now… first of all, her experiences are far from unique. They’re not even rare. At least half a dozen other academics at the conference who arrived on different flights had similar tales, and certainly the several hundred other passengers on these flights were also greatly inconvenienced. And it’s easy to blame the airlines, most of which are either slightly badly mismanaged or horribly mismanaged, but the reason for this mismanagement lies deeply imbedded in our society, and it’s very simple. Simple, but profound.

While there are exceptions, in the vast majority of cases, as a society, we seek the cheapest prices for everything, no matter what the long-term costs may be. We reward short-term greed and refuse to consider the long term societal and personal costs of such short-term thinking. The airline mess is a perfect example of what can happen.

Now, it’s not exactly a secret that oil supplies are tight, nor has it been unexpected that oil prices would rise over the long-term. Some few airlines, such as Southwest, locked in lower fuel prices through hedging and long-term contracts. Most did not, because they didn’t want to pay the short-term associated costs of such hedging. So… now they’re slapping fees on everything because fuel costs are up, and the prices they charged for tickets bought months ago don’t cover operating costs.

When weather conditions are bad, congestion gets far worse than it would have to be because the United States has a terribly antiquated air-traffic control system, again because no one wants to pay the price for a modern system, not the airlines, and not the federal government. So delays and messes such as those experienced by my wife become even greater and cost small businesses and individuals millions. Larger businesses charter jets, and that increases congestion and costs in a different way.

Then, there are the other costs. Although Southwest flies only one type of aircraft [the 737], most airlines not only fly differing aircraft, but differing models from different manufacturers. This has the effect of increasing maintenance costs, and that’s exacerbated by the fact that even different model aircraft from the same manufacturer aren’t always exactly engineered for parts and maintenance compatibility. Seeking the “best deal” every time one upgrades one’s fleet may reduce procurement costs, but it also increases maintenance costs and may actually require purchasing more aircraft because maintenance delays result in aircraft being out of service.

In the interests of short-term profitability, the major airlines, again except for Southwest, developed the hub and spoke system where their flights and feeder regional aircraft congregate at regional hubs. This not only increases regional air congestion, but also ensures that any time there is a major weather problem, entire sections of the country suffer loss or significant reduction in air travel capacity. In addition, the combination of deregulation and the hub-and-spoke routing encourages “specialty” lower-cost carriers to “cherry-pick” the more highly traveled routes, forcing prices down on those routes and redistributing higher costs to routes where there’s less competition. This is out-and-out geographic discrimination, and it’s largely not based on the costs of providing service, but the degree of competition, which is limited by the fact that commercial air travel can never be a free market.

Airline deregulation was adopted in the ostensible interests of reducing airfares, but those pushing and supporting it seemed unable or unwilling to accept that so-called free market competition has extremely high indirect costs to everyone when the market isn’t truly free. In the case of the airlines, the available routes are limited and controlled by the government. The major airports located near population centers are also limited, both in numbers and in their ability to handle more than a certain number of aircraft. The barriers to entering the industry are extremely high, because passenger aircraft each cost hundreds of millions, and trained pilots and crew are not inexpensive, not to mention the costs of leasing or buying terminals, reservation systems, etc., and, of course, fuel. This is not a classical free market in any sense of the word, but everyone jumped on board because deregulation promised cheaper fares “now.”

It’s also not a traditional free market because there’s often a tremendous lag time between when the service is purchased and when the cost of supplying it is incurred. If costs increase, such as has happened in the case of rapidly rising fuel costs, the supplier can’t pass on the costs to the consumer, and, in fact, will probably never totally recover them, which is why virtually all the major airlines who cannot or will not hedge their fuel costs risk bankruptcy… because fuel costs will continue to rise.

In a nutshell, the airline mess is exactly what we as a high-tech society can expect with ever-increasing frequency and with ever-increasing costs and frustrations so long as we continue to focus on the “cheapest price,” this quarter’s balance sheet, and the idea that “free competition” solves everything. Total regulation doesn’t, either, but that’s another story for another time.