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PREVIOUS ISSUES
Business Travel Coalition Chairman Kevin Mitchell founded Business Travel Contractors Corporation (BTC) in 1994 as a corporate buying group to advance fundamental reforms to the airline industry ticket distribution system. As BTC chairman, he writes and speaks on airline competition, travel distribution reform and aviation system security.BTC was formed in 1996 as an advocacy organization to advance the interests of corporate buyers on government and industry issues.
A Call for Intervention "... BTC has consistently advocated on behalf of business travelers the need for improved airline service and has provided the Congress and U.S. Department of Transportation specific suggestions on how to ensure such improved service in the marketplace. I am here to advocate congressional intervention, which is anathema to most businesses and travelers BTC and IAPA (the International Airline Passengers' Association) represent.
Heading for Political and Economic Catastrophe
"The statistics about delays, cancellations and service failures are well known, so I will not repeat them. We also hear about the projection of passenger growth from today's 700 million to 1 billion by 2015 and how there is a crisis looming. The reality is the U.S. commercial aviation system is today already in crisis and heading for political and economic catastrophe. ... We are likely to move from the equivalent of electrical brownouts today to aviation system blackouts by 2009/2010. "No wiggle room" in the system will soon be replaced with starting each morning in a deep Katrina-like operational hole.
"The aviation system for business travelers will simply be unreliable; traveler productivity will plummet; and commercial activity will be reduced. Leisure travelers will be beside themselves as their vacation plans are ruined. Regretfully, the U.S. will have lost it role as the world's leader in commercial aviation, a critically important industry sector. And this is well before we reach 900 million or 1 billion passengers, and of course an even greater number later in the next decade."
Airlines Slow to Act on Their Own
"It is BTC's view that airlines as an industry -- and as the prime movers with respect to fundamental change -- are not energized and motivated to provide the level of leadership required to seriously move-the-dial, in sufficient time, on this pending national catastrophe. Many are weary of hearing the FAA and weather blamed with little sense of airlines' own accountability and responsibility in this area. The airline industry is more than capable of united leadership and singleness-of-purpose as when, for example, it secured $5 billion from Congress in 2001 as partial compensation for the 9-11 terrorist attacks on our nation. BTC supported that legislation. Stories in the press at the time told of an unprecedented galvanized and unified airline industry lobby. That's what is required now, but we are not seeing it.
"Status quo for the airlines means two things, in BTC's view. First, on the positive side for airlines, as we reach 800 million passengers, business travel ticket prices, and airline profits, will likely reach intoxicating highs. Second, on the negative side, the airlines are inviting serious government intervention into the marketplace that they will not find acceptable, but will have little political capital left at the time to forestall."
Prodding the Airlines
"Respectfully, this Committee should consider Reverse-Sunset legislation that provides a very strong inducement for airlines to provide and implement solutions to immediately address its portion of the current crisis and looming catastrophe. (A concept first introduced by USATODAY columnist and consumer advocate Bill McGee on March 1, 2007.)
"BTC recommends that the National Academies of Sciences, Transportation Research Board (TRB) be directed by Congress to produce two deliverables.
"First, Congress should request a set of well-vetted recommendations regarding solutions to systemic aviation system problems. Second, the TRB would be tasked with defining and stress-testing criteria to determine if there is a true market failure with respect to the reliability and customer service levels of the commercial air transportation system. The failure could be caused by a lack of national aviation capacity -- in all its many forms and causes -- or by lack of aviation industry action to address customer service problems broadly defined.
"Criteria might include auditable airline customer service recover plans or metrics such as U.S. DOT (Department of Transportation)-tracked on-time arrivals, mishandled baggage, involuntary bumpings and consumer complaints.
"After considering the ideas and strategies developed by TRB, Congress would pass Reverse-Sunset legislation embracing some or all of TRB's recommendations. If at a point in the future it is determined the airline industry has failed to deliver on its commitments, there would not be hearings to determine if there is a problem. Rather, the already-passed Reverse-Sunset legislation would become the new requirements for the airline industry.
"The DOT Inspector General would be charged with monitoring the industry vis-à-vis this Reverse-Sunset legislation and would report to Congress on a routine basis.
"The benefits of this strategic approach include:
1. Avoiding punitive, ill-conceived fixes in the near-term that will ultimately harm the consumer and distract Congress, FAA and the airline industry from working on a comprehensive and integrated package of quality solutions.
2. Encouraging the airline industry to put energy and leadership behind a campaign to introduce sustainable, fundamental reforms to the industry before the nation seriously reconsiders re-regulating portions of the industry.
3. Developing a TRB-led strategy with useful ideas that the airline industry could consider implementing voluntarily."
These excerpts were drawn from congressional testimony by BTC Chairman Kevin Mitchell. To read all of Mitchell's prepared testimony, click here.
POSTED BY: Timothy Skinner, A.A (April 25, 2008 09:27 AM)
Re-regulation of fares with a twist. The devolution of the industry is underway, but to prevent it from slipping further the concept of re-regulating the fare structures is needed.
Under the CAB days fares had a max and everyone differentiated themselves via providing a higher level of service to the paying passenger. Today, there is sufficient data available to establish a floor for fares based on route and aircraft being flown. This floor provides the foundation for carriers to use to assure they do not intentionally commit fiscal suicide.
Pricing freedom comes from the ability of the carriers to charge any price above the floor, but if customers are not satisfied with the service provided they will tell carriers with their wallet.
This action is necessary because the carriers often get so caught up in fare wars for one purpose - drive the others out of business. This idea will bring back the concept of customer service to an industry that was developed around providing a high level of service as shown in rider loyalty.
POSTED BY: RB (April 28, 2008 09:42 AM)
It's not quite accurate to imply the airlines are not already heavily regulated. Every aspect of the business is regulated and the carriers bear a lot of cost because of it. The only aspect that is not regulated would be the fares. Establishing fares that would allow the carriers to make profits is the only thing that will make a difference in the system.
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