Author: Dhruv Muralidhar, Graphics: Walton Bullard
NOTE: Dhruv Muralidhar is the Publishing Director and former Editor-in-Chief of the Business Review at Berkeley. The views expressed in this article are his and do not necessarily reflect the position or policy of the Business Review staff as a whole or those of the University of California, Berkeley. This is an editorial.
The BRB Bottomline:
Our air travel infrastructure is falling apart as airlines struggle to keep up with the resurgence of demand for travel in a post-pandemic era. Delays, cancellations, and wasted vacation days are the disturbing new norm. How did we land here? And, more importantly, how do we fly out?
I love to travel. I had big plans for how I was going to spend my summer after graduating high school. No more SAT prep, no more extracurriculars, and no more assigned summer reading. It was just going to be me relaxing on a beach in India, surrounded by family who I hadn’t seen in years and food that was only available to me in my dreams. But I graduated in 2020, and world events had different plans for my summer—mostly laying in bed and staring at the ceiling, wondering which TV show to binge-watch next.
It’s now two years later, and life is getting back to normal. From visiting museums and art galleries to watching summer blockbusters and dining in restaurants, like most Americans, I have re-embraced the parts of my life I never thought to appreciate. But as I plan to go on that long-postponed trip, I hear whispers of a troubling new trend. Flight delays and cancellations are plaguing the air travel industry at an alarming rate—and no one is doing anything about it. So today, let’s pull back the curtain on the airlines in disarray and discover why we are in our current predicament and what we must do to fly above the fray.
The Runway to Hell
The COVID-19 pandemic undoubtedly played a large role in landing us where we are, but the story doesn’t begin in 2020. To get a true picture of how the breakage of our air transportation system was decades in the making, we need to travel back to the year 1978.
1978: Deregulation Palooza
America is a large country, spanning from ocean to ocean and pole to equator. It used to be the view of our government and of the people that having a fast, safe, and reliable way to traverse the great expanse was important to the growth and prosperity of the nation. When air travel proliferated and became the best way to get around, the federal government created the Civil Aeronautics Board (CAB) to oversee and regulate the routes and fares provided by airlines for interstate travel. This way, airlines could not price gouge and had to provide routes to all parts of the country, even if it sometimes meant taking a financial hit. To put it simply, air travel was treated as a public utility, like water or electricity, with the government setting prices and ensuring fair coverage.
This changed in 1978 with the passage of the bipartisan Airline Deregulation Act, which eliminated the CAB in favor of less government control over airlines. Airlines were now free to expand their routes and set their own prices and policies. Deregulation was a net positive—at least in the short term. Competition increased as new airlines competed over lucrative routes for which they had to lower fares. But soon, the industry destabilized. To maintain profitability despite low fares on popular routes, airlines forced themselves to charge exorbitantly for other, less-traveled routes—or eliminated them altogether. These maneuvers created fewer options for travelers while also forcing higher rates on most Americans and grounding communities in smaller cities and rural areas.
An Oligopolist’s Dream
The newly deregulated and destabilized industry was not sustainable. Soon, despite canceling routes and increasing prices, many airlines were simply unable to remain profitable. The 1980s and 1990s saw a wave of airline bankruptcies across the country.
The bankruptcies not only eliminated some airline carriers but also made the environment ripe for mergers and acquisitions. Decades of this behavior led to a landscape where four of the largest airlines (American, Southwest, Delta, and United) have currently captured about 80% of the domestic travel market. An analysis by the Associated Press found that the imbalance is further magnified by the fact that a single airline controls a majority of the market at 40 of the 100 largest American airports.
The COVID-19 Era: Federal Spending to the Rescue
The pandemic shined a bright light on the cracks in our systems and institutions, and the airline industry was not exempt. With lockdowns and quarantines around the globe, nonessential travel declined sharply, with international tourist arrivals at the end of 2021 at a level 72% lower than in 2019. Cruiselines and airlines were facing plummeting stock prices as investors saw no easy way for the companies to boost revenue in the short term.
Between the CARES Act, the Consolidated Appropriations Act, and the American Rescue Plan, legislators bailed out commercial airlines to the tune of $54 billion during the pandemic. There was only one condition: the airlines would use the money to prevent laying off employees and reducing pay and benefits. The rationale was two-fold. For one, limiting a spike in unemployment was important to stabilizing the economy. And two, lawmakers knew that if the airlines were to drastically downsize, when the demand for air travel did return, there would simply not be enough staff to meet it. Simple enough, right?
In what could only be described as a remarkable case of pandemic profiteering, airlines turned to voluntary buyouts and early retirements to ensure that they could limit their labor costs and maximize profitability. Since these actions didn’t technically constitute layoffs, they were in the clear as far as the government was concerned. Airlines like Delta counted on the desperation of employees in a pandemic panic to take the cash-incentivized buyout or early retirement. And these “not-layoffs” weren’t limited to American companies either. European airlines like Lufthansa received bailout money from their own governments and did the exact same thing. Essentially, airlines took our taxpayer dollars with the understanding that they would not cut their workforce and then found a technicality to do just that.
The Fruits of Their Labor
Predictably, at a time when people are finally ready to see the world after seeing the walls of their homes for two years, airlines struggle to maintain staffing at a level necessary to fly their routes.
Not only do airlines not have enough ground crew and cabin crew, but they don’t even have enough pilots. A pilot shortage has forced airlines to increase the shifts of the existing flight crews, leading to exhausted pilots and potentially unsafe flight conditions. As a result, many airlines, especially in Europe, face pilot strikes in protest of unsafe working conditions. Europe is not alone in its airline worker discontent. Emboldened by a rising labor movement across the country, domestic airline employees from Southwest to United have been renegotiating the terms of their contracts in the face of tougher working conditions.
And because becoming a pilot requires 1,500 hours of flight experience, the pilot shortage is not a problem that can be solved in the short term. Airlines are calling for the 1,500-hour rule to be waived in favor of a lower requirement in order to quickly train pilots. They also want to raise the mandatory retirement age. Simply put, airlines made a bad bet and are now trying to cut corners with potentially catastrophic safety implications to make ends meet.
More Than a Blip on the Radar
Just how bad is the problem, though? Well, numbers don’t lie, and, in this case, they tell an awful story.
The Price is Not Right
As inflation tears through Americans’ wallets, air travel prices have never been higher. On average, domestic airline ticket prices this summer are 24% higher than they were in the summer of 2019. There are a multitude of factors for this price hike, including higher fuel prices and airline executives trying to make back the lost profits of 2020 and 2021.
There’s also a supply-demand issue with more demand for airfare even as airlines cut routes amid labor shortages. Which routes the airlines choose to cut is also an issue. Since planes use a large amount of fuel during take-off and landing, it is more economical to fly longer routes. As such, airlines prioritize coast-to-coast flights, with shorter flights from hubs to smaller cities and rural areas being the first on the chopping block.
It’s not just the ticket price either. Baggage fees have been on the rise for years, well before the current bout of inflation. Gone are the days of free checked luggage, with most airlines opting to charge you for each bag (not to mention excess baggage fees). In an attempt to scrape together whatever money they could in the early days of the pandemic, many airlines like JetBlue, United, and Delta increased the prices for checking luggage. Those prices haven’t come down, even after air travel became more prevalent in the last year. Thirty or forty dollars may not seem like a lot to a single traveler, but for a family of four, each with a couple of bags, baggage fees can exceed the price of another ticket.
Cancellations, Delays, and Lost Luggage
But even if you manage to scrounge up enough money for you and your family to take a trip this summer, you still might not get there. Over Memorial Day weekend, there were 2,800 cancellations and 20,000 delays in the United States alone. And let’s be clear. Flight timings do not operate in a vacuum. Flights are linked together in a complex web through connections and layovers with delays in one major hub, like Atlanta, cascading across the world. Delta Airlines, which is based out of Atlanta, saw 9%, 6%, and 4% of its flights canceled worldwide on Saturday, Sunday, and Monday of Memorial Day weekend, respectively. That represents tens of thousands of people stuck in airports for hours, even potentially overnight, instead of at their destinations. 88,161 flights were canceled from January to May of this year—the second most in that five-month period since 1988.
Oh, and that luggage for which you spent an arm and a leg? Chances are it’s not at your destination even if you finally make it there. This summer, the number of lost luggage claims is 30% higher than in 2019. In April alone, 220,000 bags were either lost, damaged, delayed, or stolen. It’s hard to enjoy your three-day weekend trip when your clothes and toothbrush are delayed by two days.
An Empty Cockpit: Where’s Pete?
Now having a better understanding of why the airline industry is in the mess that it’s in, we need to ask the pressing question—why has the government not intervened? Despite the elimination of the CAB, the Federal Aviation Administration (FAA), managed by Secretary of Transportation Pete Buttigieg, is still in charge of consumer protection.
The Blame Game
Much like me, when I’m late for work, at first, the airlines tried to blame the weather for the delays and cancellations. When that story seemed too far-fetched, they started blaming air traffic control and airport security for being understaffed, a convenient excuse since both are managed by the government and not the airlines themselves. This, of course, runs into the slight issue of just not being true. Data shows that weather and air traffic control staffing accounts for just 17% of all delays; this is the lowest level since 2004. The same data shows that airlines are directly to blame for 41% of delays, and late arriving airplanes (which are categorized separately but still mostly an airline issue) account for another 37% of the delays. Essentially, the airlines were mostly or completely to blame for 78% of the delays from January to May of this year and then attempted to obfuscate the truth from the public.
This culminated in a rare public fact-check between a United executive and an FAA official. United Airlines COO Jon Roitman, in a letter to employees, blamed the FAA’s staffing procedures for air traffic control, saying, “We estimate that over 50% of our delay minutes and 75% of our cancels in the past four months were because of FAA traffic management initiatives… we expect the U.S. aviation system will remain challenged this summer and beyond.” The FAA responded by releasing a statement challenging Roitman’s claim stating, “On July 3rd and 4th there were no FAA staffing-related delays at all, yet airlines still canceled over 1100 flights, a quarter of which were United Airlines flights.”
All Bark and No Bite
And while I love a good public takedown as much as the next person, releasing fact-check statements does nothing to actually improve conditions for passengers. So while we may have wanted regulators to… regulate, what we got instead was Secretary Pete Buttigieg hopping on a virtual meeting with airline executives to chastise them. A person knowledgeable about the meeting told Reuters that Secretary Buttigieg “pushed airlines to scrutinize whether they can reliably operate the schedules they have published and future schedules under consideration.”
After seeing the chaos on Memorial Day weekend, with the July Fourth weekend on the horizon, the government’s plan was to ask airlines to do better. No punishments. No extra oversight. How did that turn out? According to data from FlightAware, 21.25% of flights into and out of the country were either delayed or canceled during the holiday weekend, with the average delay close to an hour. And in an occurrence that would be funny if it weren’t so depressing, Secretary Buttigieg’s own flight from D.C. to New York was canceled just a couple of days after his call with the airlines.
Waking Up From This “Flightmare”
We must fix this crisis before a summer of discontent turns into years of malfeasance. Since Secretary Buttigieg found out that asking nicely won’t work, what will?
Hit ‘Em Where it Hurts
To forgo the inevitable free-market criticism, we are far past waiting for the market to fix this issue. In fact, it was deregulation and an attitude of “the market knows best” that helped lead us into this current predicament. Vigorous government intervention is not only necessary, but it is the most promising tool in our limited arsenal.
As a matter of principle, it’s not right that a company that doesn’t compensate its workers fairly and fails to provide a service to the satisfaction of its customers makes a profit. Yet here we are. American Airlines reported a $476 million profit in Q2 of this year. United Airlines similarly made a profit in the most recent quarter, with revenue rising 6% despite capacity decreasing 15%, meaning they were making more money despite providing less service.
If the financial bottom line is all these companies care about, then, in the short run, that’s where we must target them. The FAA must immediately announce a new system for the levying of fines for breach of service. We, the taxpayers, gave these companies billions in bailouts, and now it’s time for them to do their jobs or face the consequences. The FAA also needs to create and enforce a new system for refunds, forcing airlines to give passengers back some or all of their money if they are delayed for more than an hour. As proposed by Senator Bernie Sanders, delays for longer periods of time should also come with lodging and meals paid for by the airlines. Delayed or lost baggage compensation must be increased to ensure proper handling of passengers’ valuables. We have to make it too expensive for airlines to overextend their staff and cause delays and cancellations.
The Department of Transportation must also stand with airline staff in their fight for better working conditions, not only out of humanity but also with an eye on safety. The FAA needs to hold its ground and not give in to airline pressure when it comes to pilot training and retirement requirements. Those criteria exist for the safety of the passengers and crew, and they cannot be compromised. While reasoned reforms can be made to improve the quality of pilot training, arbitrarily cutting requirements for the sake of expediency is not the solution.
The Long View
And while those are all steps that can be taken by the government today, we need to also fundamentally reform the air transportation system. We cannot continue to exist in a system that offers consumers the illusion of choice, with large corporations controlling the movement of our citizens. The airlines need to be broken up with additional oversight being placed on how they charge passengers and set routes.
I am not advocating bringing back the CAB as it existed in 1978. We have better technology and a better understanding of aviation in an interconnected world than we did back then. That being said, with just how important air travel is to our economy and national security, its management should not be left to the whims of companies in which the average person has no say. The government needs to roll back a large part of the Airline Deregulation Act and begin moderating the prices charged by airlines. This includes the frankly insane fees charged for, among other things, switching your seat to be seated with your minor children. It is a sad reflection that something like that needs regulating, but that’s the world we live in.
The government also needs to ensure that fair coverage is provided, ensuring that small cities and rural communities are not left disconnected from the rest of the country. I have experienced firsthand how much more logistically difficult it has been for me to visit my parents once they moved from Detroit to Tampa. Now imagine the plight of millions who live in regions even more remote. Equal access to air transportation is just as key to economic and social mobility as access to highways and broadband.
The Final Word
It is a bleak world to live in when companies can record profits while providing substandard service and mistreating their workers. It is bleaker still that people in the wealthiest and most powerful country on Earth cannot buy an airline ticket with the confidence that they will reach their destination with all of their belongings at the date and time written on that ticket.
If you have not experienced the airline crisis yourself, chances are that you know someone who has. In the week that it took me to research and draft this article, my dad’s return flight from India was delayed at each of its three legs, and my boss’s flight from New York to D.C. was outright canceled. The problem is simply so pervasive that no one is safe—not me, not you, and not the Secretary of Transportation.
It’s time for Secretary Buttigieg and the FAA to do their jobs and regulate an industry that is rife with mismanagement and lack of foresight. The American people deserve fair prices and good coverage. We deserve consumer protection and a system of safeguards. We deserve a government that will fight on our behalf. We deserve better air travel.
- The airline industry is facing unprecedented delays and cancellations, upsetting many Americans’ wishes to travel after the pandemic.
- Deregulation of the industry in 1978 led to a period of bankruptcies and mergers which created an oligopoly.
- Airlines took billions in pandemic bailout money with the promise to not cut staff but did so anyway.
- Workers at airlines are fed up with poor working conditions, and many are striking.
- The prices for tickets and fees are increasing even as service is on the decline, with delays, cancellations, and lost luggage becoming the norm.
- The government is sitting on the sidelines instead of taking decisive action to protect consumers.
- We need to push back against the airlines to get our air transportation system back on track through a set of short and long-term reforms.