The Airline Industry - and you?
The aviation industry has been around for a very long time, and in that time there have been a number of advancements that have made the industry safer and more efficient operations wise; however, the airline industry as a whole is under a very tight string in recent years, but more over since 1978. In a previous post I talked about how deregulation forced many airlines into bankruptcy and caused the merger of many more creating what we call today legacy Air carriers.
A Legacy Air Carrier is an airline that was in operation before 1978 and survived the bankruptcies and mergers that followed. Legacy Air Carriers face insurmountable odds in today’s industrial environment where those airlines formed after 1978 do not. This variation between the two types of airlines causes friction when it comes down to the operation of said airline.
The legacy airlines focus on a hub and spoke system where flights from one place head to a large airport, and you leave that larger airport to another destination. This allows the airline to focus maintenance and fueling operations in a central location decreasing costs, however this type of operation is not the typical operation for the baby-lines. The baby-lines operate more on a point to point system where there is no one central location for the airline operation. This leaves only the most profitable routes in operation and requires no unprofitable routes to get passengers onto the profitable routes.
This is simplistic at best, but gives you just a taste of how these two airlines see the world. Operation is just one part of the puzzle, the human equation is one of, if not the, largest part of an airline budget and in the case of the two airlines could not be more different.
The legacy air carriers where founded in a different time, may as well be the 1500’s compared to the newly founded baby-lines. When the legacy air carriers where formed legal laws where different, how the common laws where interrupted was different, and the entire outlook on the future was different. These all combined to make the airline operate in that world profitably. This world had unions just like today’s, but in a vastly different objective at hand.
Airlines have never been at peace with unions, in fact many an airlines problems are directly proportional with how the union and airline management make nice. As union strength grew in the legacy airline, the union power is the smaller baby-lines was minimal. Unions focuses on the larger airlines setting work hours, pay increasing, and general rules of business conduct. These rules where necessary to ensure airline management would not neglect their employees.
Now though those same rules which helped the legacy air carriers, hurt them now. The laws have changed and the way airlines function is drastically different. The legacy Air Carriers are too large, too unionized, and too political to make to avoid the environment of the current industry which put them on a course to destroy themselves in due time.
As you can imagine the smaller baby-lines are in no hurry to rush into this same situation and their business models are drastically different then the legacies that they will have the ability to avoid the same cliff the legacies are heading for.
Will the legacies be able to make the turn and avoid the cliff, will the legacies be able to convince congress that the cliff should be farther away then it is now. Will the baby-lines allow the Legacies the extra distance to change their business models to be in a better position to complete with the baby-lines?
It is all up in the air and any change to the environment directly affects you more now then ever. We live in a time where all of these things are changing the Legacies are seeing stars of bankruptcy dancing in their heads and only a few Legacy lines remain. Are Legacy lines too large to fail, should they be allowed to fail, these questions should be important to you because they directly affect your ability to take cheap economical airfare to anywhere in the world.