Analysts See Hope at American Airlines

Wednesday, November 30, 2011

Though it sounds like bad news, some analysts are saying the bankruptcy filing by American Airlines and its parent company could be a good thing. On Tuesday, Fitch Ratings said American Airlines' bankruptcy opens "yet another window for structure change" in the flailing U.S. airline industry. Can an industry facing skyrocketing fuel prices, increasingly complex security procedures, and growing concerns about air traffic control safety find its wings?

John Heimlich is vice president and chief economist at Air Transit Association, a trade organization representing the major U.S. airlines.

Comments [3]

Mr. Heimlich spoke of airline bankruptcies as part the process of 'ringing out legacy costs' in a post-regulation era. I am always disappointed to hear air line industry 'experts' limit the categorization of costs as some dynamic defined only on a carrier by carrier basis, and not something which should be viewed in a much larger context.

What I'm getting at is that the operation, and therefore the cost, of air carrier seat and freight capacity is the only element of air transportation that was deregulated in 1978. Yet units of seat and freight volume must consume units of navigation capacity in the process of creating transportation; and that navigation capacity continues to be rationed by a federal monopoly which owns, operates AND regulates it. So, air transportation was never really deregulated. Only seat and freight capacity were deregulated while navigation capacity remained in the federal domain. This resulted in a dysfunctional hybrid architecture, were the true cost of operation is difficult to define and manage. This is one reason for the continual stream of bankruptcies in the industry.

I propose that if Mr. Heimlich and the ATA desire to understand the true cost of air transportation, and thereby introduce sustainable economic functionality to their industry, they should support investigating the use of NextGen technology to commoditize air navigation through the trade of 4-dimensional trajectories. And they should force the FAA to get out of the air traffic control business.

Dec. 01 2011 08:08 PM
carl queens, n.y.

isn't it sad that the airline industry, the industry single handily responsible for the largest industry in the world, tourism,can't get out of its own way!.. for every dollar of profit made since the brothers wright lifted their feet off the ground, a dollar was lost.. long live the airline industry..

Nov. 30 2011 01:56 PM

It,s always a good thing when prominent companies lead by example! Really, when money is skimmed off the top and the oldest jets in the nation are flying, bankruptcy looks pretty profitable every chance it's an option!!

Nov. 30 2011 09:30 AM

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