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"Deregulation brought lower fares, decline in U.S. airlines' customer service"


 
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Tuesday, April 3, 2007

Deregulation brought lower fares, decline in airlines' customer service
By Dan Fitzpatrick
The Pittsburgh (PA) Post-Gazette


Familiar sight: Searching for lost bags amid piles and piles of them.

The year the Epcot theme park opened in Orlando, Fla., Pittsburghers had to pay at least $758 to fly to and from Disney's Utopian city of tomorrow.

A quarter century later, the cheapest round-trip fare is 82 percent lower -- $138 -- and sunny Orlando is the No. 1 travel destination for Pittsburghers, attracting more daily local fliers daily, 710, than any other city.

The evolution of Orlando as a low-fare option reflects the larger trends in the industry and in Pittsburgh, where deregulation, new competition from low-cost carriers, and a financial retrenchment by US Airways radically changed the local airport experience.

No longer does US Airways dominate as it once did -- it handles 50 percent of local traffic, vs. 90 percent in its heyday. And the arrival of upstarts such as Southwest Airlines, JetBlue Airways and Air Tran Airways has forced Pittsburgh's dominant carrier to match low prices on popular routes, such as Orlando, which also is served directly by Southwest and AirTran.


Airfares 1982 vs. today
Click image for full version.

But was it all for the better? Minneapolis-based fare watcher Terry Trippler, who compiled the Orlando numbers and adjusted the 1982 prices to 2007 dollars, refers to the quarter-century decrease as part of a "race to the bottom" sparked by Congress' 1978 deregulation of the industry -- an event that allowed airlines to compete on price for the first time.

The same happened on several other flights measured by Mr. Trippler over a 25-year period, including local routes to Boston (down 73 percent, to $78 round trip), Chicago (down 71 percent to $98) and Los Angeles (down 65 percent, to $258).

"These irresponsible airfares, as I see it," said Mr. Trippler, of Cheapseats.com, "are the reason why air service has dropped."

As proof, he cited a new airline quality report issued yesterday by the Aviation Institute at the University of Nebraska and Wichita State University -- a report that reinforces the emotional price consumers are paying for rock-bottom fares. Airline delays, reports of mishandled bags and bumping of passengers are all up, according to the report, as airlines that cut tens of thousands of employees during a post 9/11 scramble to keep pace with record passenger loads and remain competitive on fares while taxing an already overloaded air traffic control system.

US Airways was fifth from last in total performance in the quality report, with the highest consumer complaint rate (1.36 per 100,000 passengers) of any carrier.

"The stress in the airline system is across the board," said report co-author Brent Bowen, director and professor at the University of Nebraska. "Passengers, airline staff, airline corporations are as stretched as we have ever seen them. Seeing declines in industry performance isn't surprising in this environment, and it will be difficult to change the trends we have seen."

Of course, US Airways' draw-down in Pittsburgh -- cutting almost 400 flights in five years -- has given the local airport some operational advantages, with significantly less congestion than the US Airways hub of Philadelphia, for example.

Pittsburgh International ranked ninth in on-time performance among 31 airports last year, according to the U.S. Department of Transportation, and US Airways had the smallest percentage of flight delays among carriers serving Pittsburgh International, with 12.3 percent.

Moreover, Pittsburgh's average airfare of $139 is now tied for 13th lowest among major U.S. airport markets, and the number of local (or so-called "origin and destination") travelers has increased more than 30 percent in the last five years, from 3.2 to 4.2 million people

But as this past winter showed, Pittsburgh is not immune to the larger industry turmoil or weather-related problems that can easily reverberate around the country.

In February and March, icy weather grounded thousands of passengers in Pittsburgh and other parts of the Northeast as JetBlue Airways and US Airways struggled to keep their operations intact. Some JetBlue customers sat on the runway of John F. Kennedy International Airport in New York for more than 10 hours and flights in Pittsburgh were canceled for several days.

JetBlue's low-cost structure was partly blamed for the meltdown -- the airline did not add the appropriate amount of infrastructure as it evolved from industry upstart to one of the nation's 10 largest carriers.

Even the one carrier that has made a name for itself on cost and service -- Southwest -- is struggling to maintain that balance. The Dallas carrier still scores consistently high in airline quality (it recorded the lowest number of complaints in 2006 -- 0.18 per 100,000 passengers) despite its low-cost structure.

But with its operating costs up 25 percent in the last five years due to fuel prices, it is talking about charging a fee for assigned seats -- it now offers open boarding by categories.

All airlines, Mr. Trippler said, have yet to meet "a revenue source they don't need."


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