Too-Big-To-Fail Airlines are Too Big

When American Airlines, one of the few airlines that control most of America’s air transportation system, went down for several hours last Thursday, how many business meetings were missed by passengers whose flights were delayed or canceled? How many tour operators had to cancel or delay departures? How much money was lost throughout America when a large portion of its air transportation system went down for a portion of the day?

The computer glitch reportedly affected 291 flights at three airports: Chicago O’Hare, Dallas-Fort Worth and Miami International.

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If American Airlines knows why its system went down it is not telling us, but we do know that it had to cost money to many of the passengers whose schedules were thrown off. If the airline cut maintenance costs in such a way that it led to the computer outage, then the airline just externalized those costs to its passengers and the economy at large.

If the airline doesn’t know what caused the problem, it could hardly be expected to know how to prevent its recurrence. And this problem actually took place before the real challenges the company faces when it tries to complete the ultimate merging of the American Airlines and US Airways computer systems into one master system later this year. That will be when problems are most likely to arise.

A similar thing happened in July when a computer problem caused United Airlines’ website to go down for about two hours, delaying many flights.

American Airlines and US Airways, soon to complete their merging into one airline, control about 20 percent of the domestic airline market, according to the U.S. Department of Transportation. United controls about 15 percent.

According to CNBC, when the American-US Airways merger is complete, the Big Four: Southwest, United, American and Delta, will control 87 percent of commercial traffic, nine out of 10 flights.

Theoretically, if American has a systemwide problem, it knocks out about 20 percent of America’s air transportation system. That is a lot of transportation and business to be controlled by one computer system.

The few airlines we have left that have gobbled up all the others like to assert that they are independent, private companies and should not be told what to do by anyone. When they are making money they don’t like to be bothered.

When they are struggling, especially over things that are beyond their control such as 9/11, they come to Congress and ask for help, because obviously the nation cannot function without them.

But we should remember that the megamerger airlines are operating under special grants of immunity from the laws of the United States that prohibit the monopolization of industries. Those laws were put in place for a good reason. The idea is that free markets are the best basis for a healthy economy, but monopolized markets are not free.

In a diversified marketplace, when one airline went down there would be plenty of others to jump in and take up the slack. And if an airline went down too often, it would likely begin to lose marketshare to competitors who perform the service more effectively.

When there are few competitors, just a few companies that divvy up the market in a gentlemanly manner, there is little real competition and little free market discipline to encourage anyone to maintain a high level of service. And this is what we get.

Why did our Congress give these companies immunity from antitrust laws? The laws are there to protect our free market system. But the airlines managed to convince Congress that they would be “more competitive” if they could be allowed to merge and merge and merge until the entire industry was consolidated into a handful of carriers.

And how would they be more competitive? They were not talking about competing by offering customers a more attractive product or better prices. That’s apparent by looking at the marketplace, what is being offered and the clamoring of discontent from consumers about shabby service. It can be confirmed by looking at how they all march in lockstep toward cutting costs and offering ever fewer services and an increasingly bare bones product.

When the  airline executives tell Congress they will be more competitive, they mean that they will be larger and able to control a larger portion of the market, have larger fleets, and compete with the other mega airlines in terms of size and power.

And since they were given this exception to the law, and since they are subsidized by the public in a variety of ways, including the building of airports, shouldn’t they be held to some kind of standard in terms of a responsibility to serve the public effectively in this industry that is essential to the economic functioning of the country?

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