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 The Brancatelli File

joe THE HIGH-STAKES
OF AIRLINE WORLD WAR II


BY JOE BRANCATELLI

July 15, 1997 -- Did a chill run down the back of your spine last week? One should have, because the price gougers who run most of the nation's major airlines won another battle in their war against the low-fare carriers.

I refer, of course, to the announcement of the ValuJet-AirTran merger, which came hard on the heels of the Western Pacific-Frontier and Pan Am-Carnival combinations, and the recent loss of carriers like Nations Air and JetTrain.

The little guys who help keep fares fair are being swatted out of the skies. Again. And if you think their fight ain't your fight, we business travelers may have already lost the war. Again.

Maybe you're too young to remember Airline World War I, but I was there. I flew in the war, my friends. I remember.

From the dawn of the Airline Deregulation Act of 1978, terrific little enterprises like Air Atlanta, Midway Airlines and New York Air took to the skies. Midway offered business travelers real food and comfortable seats at a fraction of the prices charged by the big guys. New York Air went right to the front lines of business travel--the Boston-New York-Washington corridor--and had the audacity to challenge the Eastern Shuttle, which treated every frequent flyer like a prisoner of war. And, of course, there was PeoplExpress and dozens of imitators, all of them cheap, goofy and unpredictable, all of them scaring the bejeezus out of the major fat cats.

Then, of course, the majors invented their secret weapon, yield management, the computerized shell game that changed the battlefield. By 1991, the majors' computer superiority had won the war and the surviving airlines began to enjoy the spoils: They jacked up our fares, herded us into turbo-props and took away our gruel.

Airline World War II started, quietly, in 1993. Kiwi rounded up some old soldiers--out-of-work stews, pilots and mechanics--and cobbled together an airline based on decent coach service and fair coach fares. Southwest Airlines went national. New carriers brought competition to monopoly routes. And, of course, there was ValuJet, the ultimate commodity airline that finally liberated the South from Delta's death grip.

For one shining moment last year--April 23rd to be exact--it looked like we'd won Airline World War II. That was the day the Transportation Department released its study on low-cost carriers. DOT codified what we all knew anecdotally: one-way fares were $54 a ticket lower in cities where a low-fare carrier existed and $70 a ticket lower if that city happened to be the hub of a major airline; 40 percent of the nation's travelers now had access to a discounter; and flyers had saved more than $6 billion in the previous year thanks to the new entrants.

Three weeks later, it all came crashing down.

On May 11, ValuJet Flight 592 plunged into the Everglades and killed 110 people. CNN decided the ValuJet crash meant low-fare carriers weren't safe. The rest of the media played along and a cowed Washington bureaucracy eventually picked up the message.

The war against the high-fare majors turned that Saturday night and it's been downhill ever since. One year later, it remains impossible to state the simple truth and have people believe it.

But I'll try again: there is no correlation between fares and safety.

The anecdotes bear that out: USAir, the prototypical high-fare airline, had five fatal crashes in five years, but Southwest, the quintessential discounter, has never had a crash. And the statistics bear that out: no low-fare, start-up carrier ever had a single fatality before ValuJet 592. Compared to this perfect record during the first 17 years of deregulation, the majors recorded almost 5 fatalities per 10 million departures and the commuter airlines almost 24 fatalities per 10 million departures.

In the 14 months since the ValuJet crash, the start-ups have been in full retreat. Many of the survivors are merging. Those that aren't are hanging on by their financial fingernails. At least six small guys have surrendered their operating certificates and two others, Reno and Midway, are now little more than surrogates of American Airlines.

What's the business traveler's stake in this war? Let the one-way, walk-up fares speak for themselves:

+ Delta monopolizes the Atlanta-NewYork/LaGuardia route and charges $523. Across the Hudson River, Delta has to compete with Kiwi on the Newark-Atlanta route and its fare is $253.

+ United and American have a cozy duopoly on the Denver-Chicago/O'Hare route. The fare: $555. Western Pacific and Frontier fly from Denver to Chicago/Midway and the fare is $331.

+ Northwest must compete with Vanguard on the 80-minute flight between Minneapolis and Kansas City, so Northwest matches Vanguard's $99 fare. But on flights of a similar duration, between Minneapolis and Indianapolis, Northwest and TWA divide the market and charge $420.

If you've been an isolationist until now, let me be the first to sound battle stations. It's now or never, fellow travelers. If the majors win World War II, we'll be prisoners of war. Again.

This column originally appeared at thetrip.com.

Copyright 1993-2005 by Joe Brancatelli. All rights reserved.