Airline Regulations

The terrorist attacks on September 11, 2001 shook the United States in a profound way, deeply upsetting the national perception of safety within U.S. borders. No industry or sector of the economy felt the impacts of these events more than the airline industry. Both the immediate reaction to the attacks and the long-term repercussions have negatively affected the industry. Today’s airline industry is much different than it was prior to September 11. There is a much smaller work force, more low-cost carriers, more security and more fees associated with flying.

pilots, and new next generation aircraft acquisitions to carry the airline proudly into the next 75

First lets understand the roots of the pilot shortage issue. Before the 1990s most pilots had military backgrounds and the natural progression once they retired from the military was to work for a major mainline airline such as American or Delta Airlines. Previously the military was much larger and the amount of pilots coming out of the military replaced the amount of pilots who reached the age of 60 (mandatory retirement age at the time). But about 15 years after the military draft ended there was an increase of pilots who started

The deregulation of the airline industry may have been a win for passengers, but most likely not a win for labor groups. Prior to deregulation the airline industry was highly unionized, enjoying excellent wages, benefits and pensions. Since deregulation there has been a drop in wages and most carriers have eliminated pensions. Also before deregulation, unions would bargain with management at each air carrier and once a contract was reached, the next carrier would begin bargaining from the other contract, to enhance theirs. This continued bargaining from carrier to carrier helped to build better work rules and compensation.

The results of airline deregulation speak for themselves. Since the government got out of the airline business, not only has there been a drop in prices and an increase in routes, there has also been a remarkable increase in airline service and safety. Airline deregulation should be seen as the crowning jewel of a federal de-regulatory emphasis. Prices are down: Airline

“(5) The development and maintenance of a sound regulatory environment which is responsive to the needs of the public and in which decisions are reached promptly in order to facilitate adaption of the air transportation system to the present and future needs of the domestic and foreign commerce of the United States, the Postal Service, and the national defense” (Airline Deregulation Act of 1978). This set of words led to the expectation placed on the Federal Aviation Administration (FAA) to establish and maintain a new set of rules and procedures in place that would consequently make aviation

American airline industry is steadily growing at an extremely strong rate. This growth comes with a number economic and social advantage. This contributes a great deal to the international inventory. The US airline industry is a major economic aspect in both the outcome on other related industries like tourism and manufacturing of aircraft and its own terms of operation. The airline industry is receiving massive media attention unlike other industries through participating and making of government policies. As Hoffman and Bateson (2011) show the major competitors include Southwest Airlines, Delta Airline, and United Airline.

In some cases, an airline has even had to remove themselves from an airport due to the unpopularity or the inability to fund said airline flying out of that airport. While losing routes, and therefore revenue, is a big deal to most of these major airlines, the pilots of these airlines seem to have a different take on the problem. They believe it is the salary they get from the airline themselves that deters pilot from flying commercial planes. Pilots pay $150,000 to $200,000 to obtain their commercial license, while some airlines are only offering $21,000 or less as a starting salary. All in all, potential candidates for a commercial pilot’s license are having a hard time believing that their significant training expenses will be rewarded in the long run.

The corporation known as US Airways was founded by Brothers Richard and Alex DuPont serving the Ohio River during the late 1930’s (U.S. Airways, n.d). The historic airlines origins of nearly 80 years began as a main carrier service which later, transformed into a commuter airline. Being a ground breaking company in a once relatively new field is arguably one of US Airways greatest achievements. The domestic environment of US Airways for obvious reasons is the United States of America, on the other hand its aircraft can be found circling the globe.

Europe’s system of regulation soon came under pressure. A late-1950s attempt to unify the flag carriers of France, West Germany, Belgium, and Italy collapsed under the weight of disparate national interests. By 1960, the Economist magazine bemoaned the state of the heavily regulated, fragmented airline industry. “The basic trouble,” it concluded, “remains that the world has too many airlines, most of them inefficient, undercapitalised and unprofitable.”4

The Airline Deregulation Act of 1978 within the United States promulgated an era of unencumbered competition within the market, opening the floodgates for newer carriers – with a variety of lower pricing structures – to compete with formidable incumbents. Numerous carriers consequently filed for bankruptcy, and many of the industry leads consolidated their airlines to increase their power. Within the last twelve years alone, a series of bankruptcies and mergers have resulted in ten major U.S. airlines consolidating into four market-dominating mega-carriers: American, Delta, Southwest, and United. Why is

Outsourcing Regulation: The airlines industry has been a pioneer in using outsourced services in areas like IT operations, telemarketing and 24/7 helpdesks. More and more business processes are outsourced now a days, aircraft maintenance, baggage and ground handling and in-flight catering to name a few. A single company or alliance may not find it easy to manage everything and that too at widespread discrete locations. So the entire function is not handled by a single proprietor as far as airlines are concerned. Thus outsourcing is and will continue to be quite common in the airline industry.

The Airline Deregulation Act of 1978 changed the operation of civil aviation forever and for better. The aviation when controlled by the federal government, its potential development was restricted and the air travel was very expensive and could only be afforded by few. The act brought several changes which affected the airlines as well as people.

For the past ten years, pilots at Alaska Airlines have been underpaid, and now, after merging with Virgin America, pilots are protesting Alaska’s negligence. In 2005, Alaska pilots had pay cuts of 26% when the airline industry lost an estimated $7.4B (IATA, 2005) due to fuel price surges (James, Andrea, 2007). Since then, fuel prices have fallen significantly; pilots at Alaska have been paid less than those at other legacy airlines, such as Delta or United (Glassdoor, 2017). According to self-reporting surveys, Alaska Airline pilots earn on average $107,860 a year while Virgin pilots earn around $100,00 a year (Glassdoor, 2017). Compared to a legacy airline like Delta, with an average pilot salary of $137,587 per year (Glassdoor, 2017), Alaska and Virgin do not pay their pilots competitively. The merger with Virgin increased dissatisfaction with their compensation, leading to pilots at Alaska speaking out against the company, specifically through the creation of an awareness campaign “This Merger Won’t Fly” to rally against the inequitable pay (“This Merger Won’t Fly", 2017). Pilots, backed by the support of their unions, are negatively impacting flights and consumers by leveraging their salience as stakeholders. Although passengers choose airlines based on price, 87% of respondents to a survey said employee strikes will cause them to book with a different airline (see Figure III). Horizon Air, an LCC subsidiary of Alaska Air Group, has been suffering the most from the

Commercial airlines has been providing a vital service to our society for many years now. For example, a trip which would take three days by car would take only three hour by plane. Society very much appreciate the convenient commercial airline offer. The United States Department of Transportation’s Bureau of Transportation Statistics (BTS) reported that 815.3 million scheduled customers traveled on United States airlines serving the United States in 2012 (Smallen, 2013). More people in our society are flying today than ever before. That’s great right? More customers paying airfare, more profit for the airlines right? If that’s the case, why are the major airlines making some of the decisions they’re making, and in most cases it’s to