Airline deregulation II
Source Louis Proyect
Date 01/05/07/14:53

In the course of driving down wages in the light of the new realities of
deregulated hyper-competition, Lorenzo found himself facing a mechanics
strikes at Continental in 1983, and then one by the pilots. In a pattern
all-too depressingly familiar during those years, the pilots crossed
mechanics' picket-lines. Sitting in consultation with his vice-president
Phil Bakes, a "liberal" attorney who had used his stellar performance on
Senator Kennedy's deregulation hearings as a launching pad into the
corporate world, the two men came up with a preemptive strike against the
Continental pilots who were planning their own strike.

Bakes had read about a New Jersey building supply company that had
repudiated its labor contracts along with its debts while declaring
bankruptcy. An appellate court had upheld the company. Richard Adams,
Continental's senior vice president of flight operations, wrote a memo to
his bosses, "I don't believe we can get these concessions on a voluntary,
persuasive basis. . . We must get an awfully big stick. . . Most effective
stick would be chapter eleven." (Petzinger, p. 209)

Lorenzo's success with Continental served as an example for a long
succession of class war bankruptcies, including Greyhound. But it wasn't
always necessary to go this full route. Other bosses were just as
perversely creative. Perhaps it would only be necessary to get newer
employees to accept lower wages. If the senior employees could retain
existing wage and benefits, they might be persuaded to sell out new hires.
When pilots crossed mechanics picket lines, and vice versa, any airline
boss would be stupid not to think in these divide-and-conquer terms.

Robert Crandall, the fang-toothed CEO of American Airlines, cooked up just
such a two-tier wage system in 1981. Just as Continental's bankruptcy was
emulated by a host of corporations, so was the two-tier wage system. It
should come as no surprise that many of the newer hires tended to be
minorities and women, against whom traditional prejudices by white workers
blended well with official compensation policies. Crandall put it this way,
"If we can't create a new airline outside of American, we'll create one
inside." (Petzinger, p. 130)

Since the early years of deregulation were marked by rapid expansion, it
benefited American to hire from this pool. Not only would the old-time
employees be bribed into passivity, the newer workers would be happy to
have a job in a time of declining expectations, the bitter fruit of

How did the unions respond to Crandall's innovation? The first union
contract to come up was that of the Transport Workers Union, whose 10,000
members represented mechanics and ground employees. They knew that scabs
were being rounded up by American all around the country, being paid $25
per day just to lie in wait for the green light. The TWU caved in.

Pilots, who are truly the aristocrats of labor, were easier to convince.
Since American intended to expand rapidly, American's co-pilots could move
upward into a pilot's seat and get a big raise in the process.

The flight attendants were going to be a tougher sell. Tom Plaskett,
American's typically sexist marketing chief, was assigned this task. He
reported later, "Flight attendants deal with everything on a more
emotional, visible level." When they wept at meetings, he observed, "It
dawned on me: What was coming to the fore in their minds was, 'I'm not
worth I'm paid.' . . . We're telling them, 'There's someone out there who's
willing to do your job at half the price.'" (Petzinger, p. 132)

After caving in, the flight attendants decided that keeping their $30,000
per year was a poor but acceptable reward for agreeing to allow newcomers
to work for $15,000 per year. An added incentive was the knowledge that
American was training every secretary in corporate headquarters to take
their jobs in case they struck.

In the first few years of deregulation, the American public thought that
they were winners. Price wars made it possible to fly anywhere in the
United States for $99. Who could possibly care that food, when provided,
was inedible or that you were squeezed into uncomfortable seats? Little did
this same public understand that this was only a passing phenomenon.
Eventually, they would end up paying the same old prices, but without the
premium service of regulation days. The top players in the airline industry
would find ways to defend their oligarchic interests in ways that were
radically disjoined from the free market ideology they paid lip-service to.

About a year ago I made travel arrangements to go to Browning, Montana,
which is the home of the Blackfoot reservation near the Canadian border. To
get there involves a circuitous route that requires lengthy stays in
various airports. A direct route to Montana would require something like 4
to 5 hours in the air, but my trip took a total of 12 hours. This is the
experience nearly everybody suffers, unless you are willing to go to Miami,
Los Angeles, Atlanta or Chicago. These sorts of cities constitute "hubs",
which more often than not are corporate headquarters for a particular
airline. Atlanta, for example, is Delta territory.

When the airlines were regulated, there was a certain commitment to
providing air transport even though the route was not profitable. Airlines,
like railroads or the highway system, were seen as a social asset. After
deregulation, all that went by the wayside. With the hub system, air
traffic is concentrated in major cities from which arteries of local air
transport flow. The only problem is that you are at the mercy of the major
airlines who can effectively dictate to the local service providers. Under
the hub system, 70 communities receiving service lost all of it, while 260
cities suffered some deterioration in air service. (Dempsey-Goetz, p. 269)

The shift to commuter aircraft as local service providers also represents a
degradation of quality. Smaller, unpressurized aircraft are less
comfortable and less safe. Speaking from the experience of flying one such
plane from Calgary to Lethbridge, it is an experience that rates somewhere
between a roller coaster ride and root canal work.

Another aspect of hub-based air transportation is the degradation in
on-time performance. With a limited capacity for takeoffs and landings, the
only recourse is for airplanes to circle around in the air or wait on the
ground until they can squeeze in. These frustrating delays, along with
airline food and in-flight showings of "The Jetsons go to Las Vegas", are
mostly responsible for periodic outbursts of "air rage" which are
manifested by altercations with flight attendants or passengers defecating
on their food trays.

Airline monopolies also circumvent free market pricing through their
control of computerized reservation systems, which is to this industry as
Bill Gates control of MS Windows is to his. When you go to a travel agency
to book a flight, the agent will use a proprietary system developed by one
or another airline that favors his own company. In the post-deregulation
epoch you have had fierce competition over whose anti-competitive
reservation system would sit on the agent's desk. Not only would this
assure whose airline got the most reservations, it would also serve as a
cash cow since it cost the travel agent a fee every time a transaction was

American Airlines was the first to hit the market with SABRE back in 1962,
which--like the Internet--emerged from military technology, specifically a
system called SAGE that stood for Semi-Automatic Ground Environment. It was
used to monitor incoming missiles and allowed Dr. Strangelove types to sit
around and play nuclear warfare simulation games.

When American Airlines decided to wipe competitors off the face of the
earth, they deployed SABRE as a major offensive weapon. It was feared by
everybody, including Braniff Airlines who alleged that the system was being
used to cancel their reservations outright. Although the Justice Department
investigated, no evidence turned up.

Considering the documented record of American Airline's attitude toward its
competition, it might not seem like paranoia to have these suspicions. Tom
Plaskett, the highest-ranking executive under American's Bob Crandall,
declared his intentions with respect to Braniff: "We've got to make them go
away." Later he would recall, "It was not good-spirited competition."
Crandall himself was even blunter. When Braniff's president Howard Putnam
set up a meeting with Crandall to discuss his worries, he secretly taped
the conversation.

Crandall: I think it's dumb as hell, for Christ's sale all right, to sit
here and pound the shit out of each other and neither one of us making a
fucking dime.

Putnam: Well...

Crandall: I mean, goddamn! What the fuck is the point of it?

Putnam: Nobody asked American to serve Harlingen. Nobody asked American to
serve Kansas City. . .If you're going to overlay every route of American's
on top of every route that Braniff has, I can't just sit here and allow you
to bury us without giving you our best effort.

Crandall: Oh, sure, but Eastern and Delta do the same thing in Atlanta and
have for years.

Putnam: Do you have a suggestion for me?

Crandall: Yes, I have a suggestion for you. Raise your god-damn fares
twenty percent. I'll raise mine the next morning. You'll make money and I
will too.

Putnam: Robert, we can't talk about pricing.

Crandall: Oh, bullshit, Howard. We can talk about any goddamn thing we want
to talk about.

(Petzinger, 150-151)

So this was how business took place under the free market reforms unleashed
by the deregulation act of 1978: sharks would eat sardines as they always
had. Braniff eventually went out of business, just the way that Bill
Gates's competitors would, one after another.

We should finally say a word or two about safety. One would suspect that
the pressures of the marketplace might lead to shortcuts that affect the
reliability of air transportation. There is immense pressure to keep pilots
flying as many hours as possible. To maximize profits, one would expect the
schedule of maintenance to be lengthened and mechanics to receive less
expensive training. When you add the heavy traffic in and out of hubs, the
prospects are less than optimum.

While accidents have generally been on the decrease as airplanes themselves
are better engineered, there are undeniably some fatal mishaps that can be
attributed to conditions produced by deregulation.

On May 11, 1996, a Valujet airplane caught fire and crashed into the
Florida Everglades killing all 100 people on board. The fire was nourished
by oxygen generators that were not identified or packed properly. Valujet
was a typical "no frills" airline spawned by deregulation.

The NY Times reported on August 20, 1997:

"Most of the technicians who first mishandled the generators, as they were
removed from other planes, were not Valujet employees or even employees of
Sabretech; they were contractors hired by Sabretech. Two-thirds of them
were unlicensed.

"Valujet had only one employee to check the work of the technicians, so it
hired two other individuals on temporary contracts to help monitor the
technicians. A more well-established airline, board experts said, would
have had three company employees monitoring each shift."

"A single licensed Sabretech mechanic, who probably worked not much more
than eight hours a day, signed off on the work of 72 people who worked
around the clock, the board's investigators said. One board member
suggested that it was not possible for one mechanic to have overseen all
such work."

On January 31, 2000, an Alaskan Airlines jet crashed, killing all 88 people
on board. The airline culture was hostile to "interference" from the
beginning but its standards dropped even lower when deregulation set in.
Its in-house newsletter touted an executive who ordered 25 bottles of vodka
in Siberia to de-ice a plane's wings - something the Federal Aviation
Administration would never approve.

A July 15, 2000 Montreal Gazette article reported: ''They see themselves as
being above any moral or ethical code. 'And they're used to making their
own rules.'' So stated Deby Bradford, a 10-year Alaska flight attendant who
recently left to become an instructor pilot.

An FBI and the National Transportation Safety Board examined whether
negligence by Alaska contributed to the crash of flight 261. They
discovered, according to the Gazette report:

-- "In an emergency nationwide inspection ordered by the FAA in February,
Alaska turned up with the highest percentage by far of MD-80s flying with
worn stabilizer jackscrews, the part suspected as a cause of the crash. Six
of Alaska's 34 planes failed the check (17.6 per cent), while only 16 of
the other 1,073 inspected at 20 other carriers (1.5 per cent) failed."

-- "In March, 64 Alaska mechanics delivered a letter to Chief Executive
Officer John Kelly saying they had been 'pressured, threatened and
intimidated' by a supervisor to cut corners on repairs."

-- "In April, a veteran, respected Alaska pilot told a company vice
president in a widely circulated letter that he was concerned about
Alaska's approach to safety and maintenance. 'I feel that at some point our
company needs to strive for a higher level than this,' Capt. David Crawley

The total number of dead in these two crashes is 188, which begins to
approach the kind of mass murder level of Timothy McVeigh who sits awaiting
capital punishment. Of course, it is in the nature of American society not
to punish corporate chieftains whose blood on their hands comes as a
unintended byproduct of the pursuit of profit. Some day a different kind of
society will sit in judgement on them and the punishment will fit the crime.


Aaron Bernstein, "Grounded: Frank Lorenzo and the Destruction of Eastern
Airlines", Simon and Schuster, 1990

Paul Dempsey & Andrew Goetz, "Airline Deregulation and Laissez-Faire
Mythology", Quorum, 1992

David Graham & Daniel Kaplan, "Competition and the Airlines: An Evaluation
of Deregulation", CAB, December, 1982

John Newhouse, "The Sporty Game," Alfred Knopf, 1982

Thomas Petzinger, "Hard Landing", Random House, 1995

Anthony Sampson, "Empires of the Sky", Random House, 1984

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