Focus 580; The Impact of Mergers in the Airline Industry

This morning in this part of focus we'll talk a little bit about these two mergers and see what they tell us about what's going on these days in the airline industry. Some people say that this is the logical conclusion of the deregulation process that was began some 20 years ago and that really wasn't the exactly the idea that there would eventually be consolidation to the point where we might be talking about just a handful of major airlines dominating the American market. We'll also talk about how people in Washington in Congress and in the administration might be thinking these days about the airline industry and what they may think about all of the complaints that we hear about the fares that people have to pay and the quality of service. There is some discussion that this year in Washington in Congress they might actually be talking about something like a an airline passenger's bill of rights. We'll be talking about all of these things this morning with our guest Darryl Jenkins. He is director of the Aviation Institute at the George Washington University in Washington D.C..

He is probably one of the best known authorities on aviation in Washington. He was a member of the Executive Committee of the White House conference on aviation safety and security is frequently interviewed on news nationally. He's been involved in the airline travel business for 20 years he actually began as a travel agent in 1974. His background in aviation includes consulting work for a number of major airlines as well as doing a lot of writing he's in fact authored several books. He's joining us this morning by telephone. And as we talk you certainly should feel free. You folks who are listening should feel free to call him. Maybe you have some questions of your own to ask. The number here in Champaign Urbana 3 3 3 9 4 5 5. We also have toll free line good anywhere that you can hear us that is eight hundred to 2 2 9 4 5 5 3 3 3 W I L L and toll free 800 2 2 2 w. whilom. Mr.

Jenkins Hello. Hi. Thanks very much for talking with us that I'd like to chat with you. I think maybe I'd like to start by talking just a little bit about these two proposed mergers and maybe we'll take them in the order that they came so well start start talking about. The United proposal to buy US Airways that came last last year. And I guess in some sense for I can understand what's in this for us air and the other what's in the other deal for way because they're not and neither of the airlines particularly in terribly good shape. But I guess the question I'm interested in having you talk about and let's again take the United case first is what's in this for United. I think most of the larger network carriers the ones that run hub and spokes want to they have two choices in terms of growth one they can grow organically where they add flights on and invade markets where they have little market share and duke it out for a number of years trying to get a toehold in a market or you can go

into those markets and buy another carrier who's who's already there. So I assume from the side of united that they feel it's probably easier to consolidate or merge with another airline in an area that they want to grow into rather than going through some real bloody wars over for from you know that might last for five to 10 years trying to gain a toehold in new markets. They're relatively. Don't have a whole lot of flights on the East Coast although they have some very profitable routes that ranch run trans continental from the east to the west that they do quite well with. But they want to do more nor sell traffic in the eastern part of the United States and they want to get from that also more feed for their international routes. I guess I assume that that here the story for the American purchase of T W way is some. Essentially it's the same protect although this I gather was particularly in response to the United deal

because American was wanting to position itself as a put itself in the same ranks essentially with United. Well there are two really different carriers United does very well going into the Orient and dominates there. American does very well and dominates in Latin America so they. In terms of their global presence are very different carriers and they're both reasonably strong in Europe so they have different needs that they work in the marketplace. The T to be a deal as it turned out is in terms of just business acquisitions may turn out to be one of the best business deals ever made in the airline industry t to be a even though financially it's kind of a dog with fleas. Does a very good job of operating the St. Louis hub so they have good on time traffic they maintain their planes well and do

basically what an airline should do in terms of moving people between point A and Point B. So I think that will be a relatively painless merger if they take their time and don't do it rapidly. On the other hand ran a good operation. It had really been killed some years earlier by Carl Icahn who took the airline private when other airlines were expanding and basically shrunk the airline. Ended up having to sell its most profitable routes they have cash to keep it going and then in its bankruptcy filing when he ended up guaranteeing their pension funds took a block of very discounted tickets which. Because of that today he really has no chance of making any money whatsoever. So if American Airlines takes over teeth they're going to be able to rewrite the airplane leases. And that alone will save a hundred million dollars a year in cost and that one step alone will make

a within an American Airlines organization profitable. And then American is a much better price or than they never really invested in the automation that they needed in the late 70s or 80s to do pricing correctly. So over time t to be a in St. Louis under the name of American Airlines will become very profitable in a day. You know I did have read some things about this this arrangement with tween icon and. N t w a and chemical cross one. Comments by Donald Carty who is chairman and CEO or chief executive of American hoose who said at the news conference when he announced the deal he said this is one of the contracts we're not interested in being a party to. And you know you can't blame the guy for that but I guess it does that. Is there some way for American to dodge that or do they just simply have to take that on.

No they do not have to take that on and be a does not exist anymore after the merger. OK and now Carl Icahn being Carl Icahn will fight it tooth and nail in court so we're going to get a great soap opera out of this one way or another. If this if these two deals are approved it will come to the question of if and in a moment if they were approved then the two companies domestically would control half of the market. I don't know if and when was that. Mark it lists how it goes is like this use and measurement in Airlines called a revenue passenger mile. Now United flies big planes into the Orient so that makes the revenue passenger miles very high. Right now few people realize this but the two biggest carriers domestically in terms of traffic its first Delta Delta carries more passengers than anyone else. The second largest carrier in this may surprise you of domestic passengers is the southwest. The third largest carrier just a passenger is not how far they fly but the passengers within the United

States is united. The fourth one is American the fifth one Northwest So it's one of these things depending on the measurement you use. The answers will change but certainly American and United after these mergers go through will be very large dominant carriers in certain areas of the country that there is no doubt. The question is then what how do the next largest airlines respond. Delta Northwest Continental together and again the figure that I have is together they have something like 35 percent of the domestic market. The other two companies the result of the merger of American and T W A and United and US Air would clearly be much bigger than then Delta Northwest and Continental and it invites the question how do they respond and can they. Would they indeed be forced into some kind of deal for example some people say well the only way now that

Delta could really rival or compete with the next with the two bigger boys would be to buy Northwest. Is it possible then we're going to see yet another sort of a merger if these other two go through. I assume something else will happen you're certainly correct in making the assumption that Delta feels threatened. They have a very large and a very profitable hub in Allana largest origin and destination hub and the United States. If United were in the Southeast they would be expanding their Charlotte. U.S. Air has a hub in Charlotte which they really haven't done much with. United is stated though that they would expand it aggressively so for the first time we would see a major airline going into Delta Airlines catchment area in the southeast. Now in the last two years Delta has really gotten its fanny whipped beheaded if I may say it like that by Southwest in Florida and Delta Airlines right now has probably a

billion dollars of revenue at risk against Southwest Airlines in Florida. Southwest now does the most traffic into and out of Florida and with it in Florida. So there's a whole lot of money at risk all over the place for Delta So Delta is probably feeling the heat greatly right now. There are some options one we knew in the past they wanted to buy Continental Continental kind. Rebuffed them and went with Northwest and then decided they didn't like Northwest and actually joined the government in an anti-trust suit. How does the merchant with it done with Northwest it was kind of the Marx Brothers of the merger. That's how I viewed it. Now they finally split their deal apart but in doing so Northwest retain the right to turn down other companies who wanted to buy Continental. So it becomes very complicated now

so if Delta were to want to buy continental they would have to get permission from northwest which would make that expensive. Now we have some interesting personalities of play here too. Gordon Bethune who is the CEO of Continental is one of the most interesting man I have ever met. Nettle and I don't know if you can remember this 10 years ago. They've been through a number of bankruptcy. They were pretty much on the ropes just like he has been. And Gordon Bethune came in and one year turned them around. And since then every year they won the J.D. Power award. And Gordon is so convinced of his company's product that I cannot see him. Knowing him the way I do wanting to be purchased he is going to want to go out and purchase somebody and I think that's what's going to happen so Delta has few options now. There are some other airlines out there like Alaska America West which is really become a dog with fleas. But you know there

are there are options out there for them to look at and. It will be an arrest in the see how they ultimately relax but the true react but the truth is these guys are under attack. Let me introduce Again our guest for this hour focus. We're talking with Darryl Jenkins he's director of the Aviation Institute at the George Washington University and knows a lot about aviation in this country has written on it does a lot of speaking on the topic is often interviewed in media and good. Time talking with us this morning about what's been going on recently in the industry. Questions are welcome course 3 3 3 9 4 5 5 and toll free 800 to 2 2 9 4 5. Well let me ask you a question that it's speculative in nature but a lot of people in Washington are saying as far as these two deals are concerned we need to look that them very very carefully. Do you think you know given what you know right at this point what do you think the likelihood of these two deals. That is the American burgess of A and United have us they're

being approved I think given that while we know that when United wanted to buy us year that they started negotiations with the Justice Department and the Justice Department came to them with a list of concerns of things that they were worried about in terms of the creation of monopoly power. If this merger really go through now we recently saw us here spinoff about 20 percent of the assets of U.S. Airways to American. That was done clearly to placate. Justice Department concerns now I think there are some other concerns though I am not involved in these directly. If I were a justice I would have some other concerns as well. On some small routes not carrying a whole lot of traffic into parts of Virginia New York and things like that where were a U.S. Airways United merger would have basically 100 percent of the traffic on those those routes. So.

I think there may be a few more things that the justice comes to United and they asked them to do now. We saw recently when AOL Time merger which is really the model of how DOJ works they kind of give them loose guidelines. They respond to them and then DOJ either accept it or it doesn't. If it doesn't it makes additional demands. And the companies who are merging will we either respond to them or say this is no longer worth it. And so these are kind of the options I think now available to United and US Air in their merger so we see that going forward. I assume perhaps 90 percent of Justice Department's concerns are met. I have no idea how strong any remaining objections are and what justice is going to ask of United and how United's going to react.

Certainly United sun a major car about us here to make people justice happy. Now that to be an American that's an entirely different deal. And now it's the united US Air deal does not go through. An American does not end up with 20 percent of his serious assets because they're contingent upon that merger going through the teeth to be a kind of separate in a part now. I don't see a whole lot of problems with that maybe on some routes and some particular areas but TBA is really not a player even in St. Louis they only have one hub. They do not do the majority of the originating traffic into and out of St. Louis. Southwest has a very big presence there so there are not much of a player in outside of St. Louis. There there really nothing and even within St. Louis they're not what you'd call a dominant carrier. So I don't see a whole lot of problems there that that looks like it will have reasonably clear sailing with

some small glitches in it. And the thing that will be the great drama and that is the bankruptcy court because ultimately will be sold through a competitive auction that will be done by the bankruptcy court so I assume the price Americans are going to pay for. It's going to go north a tad. We have a caller here and would welcome others if people have questions. The number here in Champ. In Urbana 3 3 3 9 4 5 5 also toll free around the Illinois Indiana anywhere the Satan will travel 800 to 2 2 9 4 5 5. This color is locally here in Urbana where we are one number one. Hello. Hi. Thanks very much. I wish your guest would comment generally on what I tend to call the romance indeed the epidemic of deregulation this now seen swift sweeping over everything. Power in California. That began in 1978 with the airlines under President Jimmy Carter thanks to deregulation it seems to me

we now have a situation in which two airlines are going to control 50 percent of the business. We have inadequate airports. We have the whole panoply of problems traffic clogs. Unwanted delays inconvenient routings bad baggage. The problem is flights cancelled without warning. What can you give me your appraisal. Please. The whole approach to airlines and other vital services of deregulation. Now it's a reasonable question and I thank you for it. This list split it into two parts things dealing with deregulation and things not for example air traffic control and airport capacity which I consider two of the biggest problems we face today. The airlines were deregulated and did what they were supposed to they stimulated traffic and since 1978 we've seen well over 200 percent increase above and

beyond what we would have expected under regulation in terms of people traveling in during these twenty some years. We've seen what I referred to as the democratization of the skies where when I started out on this industry and it's been so long that I'm almost afraid to think back that far in the early 70s as a travel agent I remember and. Few people could afford to fly in most planes were in fact empty in Scottsdale Arizona where I live. We had very wealthy population and they flew. But my parents did not. My brothers and sisters did not. Now my parents who are surviving fly a hull over the place as do my brothers and sisters. My students every time they have a weekend off and I'm not loading them down with homework or some sort of a break taking a plane go somewhere in the world we never saw that when I was a kid I really feel hyped missed out a lot of my youth of

comparing that with the things that my students do now that is entirely a function of de-regulation would never have happened in a million trillion years under some sort of a government scheme. Now the airlines did what they were supposed to. But the government did not increase capacity. Really one iota during that period in the 1980 when we fired all the controllers and basically started over from scratch in terms of air traffic management and we put in an air traffic management system that was basically designed to slow down the flow of traffic to the point that the new controllers could handle in addition we've seen. Airports one of the most difficult things to do is to put a new runway in an airport where they need it. Every place in the United States where there is a new runway being planned

there is a well financed and very vocal group there locally opposing it. So we have this real interesting dilemma that air traffic is supposed to double in the next 10 years. Whereas the infrastructure which is needed to accommodate that traffic will not grow by more than two or three percent over the same time period. So at a certain point which we're already reaching the skies are full. Now we're there but they're only full in a sense in a sense where we can't manage them. But I want to go out downtown Urbana look up in the sky during rush hour and count the number of planes you see. And there aren't any. The sky is three dimensional there is so much air space that is believable and yet we controlled it as if it were a two dimensional two lane

highway. OK. So we have some real problems because of this. Now these problems as we found out last June were so severe. That if we were in a period and as it was we had 20 days of bad weather out of 30 that the system backed up so far. That entire day's worth of flights had to be cancelled just to get to people who were stranded at airports so their final destination. Now in each case an airport is generally with maybe one exception locally owned and operated. And these decisions have to be made locally. And as I know from Washington local politics are the meanest and the toughest. Now. People who live within a community have the right to make decisions concerning their community at the same time there will be consequences which will be born because of these decisions.

Now at Washington National here where I live in the last 10 years each year the aggregate level of noise has gone down each year. Local opposition to noise has increased. And I don't think this is just a local Washington phenomenon. So this is my forecast. OK. I don't want anybody to be depressed if they don't want anybody to feel bad. But in fact it will get worse. It will get worse to the point where it is so intolerable. That something will be done and nothing will be done until it is completely and totally intolerable and at that point government officials in Washington DC. Well one hundred percent make the wrong decisions. Well have we asked the caller have we. What is the answer your question.

What is the wrong decision. Well we in the 1990s we had four presidential commissions discussed the problems of capacity in gridlock. Each one agreed on solutions and the timeframe at which gridlock would approach us. And during those same 10 years Congress who has oversight in authority over these issues did absolutely nothing. And Congress is a body generally doesn't do anything until well past the time. The problem is Pete. We needed a new bridge across the Potomac you're going in the Maryland called the Wilson Bridge. They've argued over it for 10 years now that construction is starting they're stopping it. And that bridge is literally piece by piece into the Potomac River and another three or four years will be dangerous the drive over. And so I'm very pessimistic about governments acting and doing the right

thing especially with respect to our nation's infrastructure. In the time I've been here I have seen everybody argue this. I have seen commission after commission I've seen study after study not only in the United States but in Europe discuss these problems and not one place have we seen a government body take real action to solve problems. Now let me just be a little bit positive. Norman Atta who is our new secretary of transportation could be the one of the few people who we've ever had in that job who clearly understands the problem and has the ability to bring very diverse warring parties together to create solutions. Jane Garvey who is at the Federal Aviation Administration has the same capabilities. So if the problem can be solved we've got the team in place between Moneta

and Garvey to push this forward even with them in there as good as they are. It will be extremely difficult. Thank you very much and I thank you for the call a little bit past the midpoint here. I mean once again our guest We're talking with Darryl Jenkins he's director of the Aviation Institute at the George Washington University in the Washington D.C. area. I hate to be such a pessimist. Well when we you know listening you need to call him like that like you see him. He's been working in the aviation area for a long time studying and writing about it. He was a member of the Executive Committee of the White House conference on aviation safety and security that was during the Clinton administration. And now he's often interviewed in media on various topics that have to do with the air industry. And questions are welcome three three three W I L L toll free 800 1:58 WLM. I think as the caller suggested as you noted the thing that people complain most about when it comes to air travel are our delays

and that that those delays are attributed to infrastructure issues. There was a piece of legislation that was adopted last year and went into effect at the beginning of fiscal 2001 last fall something called the Air 21 aviation Modernization Act. And I know that some members of Congress feel that this will help and that they perhaps feel a little bit disappointed that there hasn't been more. Attention given to this by the news media. Can you talk a little bit about what Air 21 is and will that help. But it's better than a kick in the fanny isn't it. Gives us three years of funding. It kind of loosens up some things which formerly had been very tight and hopefully will create some sort of a performance based organization at the FAA now the FAA over the years is really that and I don't think I'm being unkind to them has had a horrific record.

General Accounting Office claims they've wasted over 20 billion dollars in taxpayer funds and projects for which we got no benefit. They have changed their strategy so many times over the years that I can't even I could not write a coherent history of what they've tried to do. So that has been problematic now. One of the reasons if you look at it structurally is that within an agency there are really no incentives for people to ever complete things back there. With any government agency there are disincentives. You get a project done and if you're a project manager you're basically out of work so you maintain your job and your status by keeping things moving as long as possible. That's how Washington works. Right now that's fine for most things because I really believe governments are best that governs the least. And if you look at our father our founding fathers they really made with checks and balances assured us. That things would move

slowly. And the last thing that I want to see is a Congress that has a new Gingrich type attitude that we're just going to change everything we're going to change everything overnight. So again Rich came in he tried a revolution. The Senate killed it. The president won and cited anyways. So things are supposed to go slowly. Now the FAA now let me having trashed them let me say some kind things in terms of the world. They do a better job at regulating safety than any other governmental body in the world. So they're they're good at regulation and that's what you expect from a government. They do it as well as any. That might not be excellent but in a relative sense they're very good. Now the same people who have this mindset of regulation have kind of a opposite mindset towards technology. So my students that come to my program that want to go into government regulation have a certain mindset. The people that come through are master students who want to go into business and

technology. They're a different breed of cat. And to breed a cat you need to advance something that has a large technological component is not the same person who makes a good regulator. And so part of the problem with the FAA as I see it is that we have assigned them in possible task. We tell them to build infrastructure and that's like asking the Food and Drug Administration to also make the pills that they regulate these people who regulate the system also supply 100 percent of the infrastructure. And I just don't see a government agency being able to do that. So somewhere or other in all of this I think we have some big structural problems that have not been addressed yet in the sky just thoroughly in this city. But we need some more work on and I think ultimately if we're to solve this problem and correct this this need that

we have for more infrastructure we're going to have to see some structural changes in the way the FAA is organized. Well we have another caller here in Terre Haute Indiana when we talk with them and this is lie number four. Hello good morning. You know deregulation worked pretty well for the first 10 or 15 years. Just a different flights probably had some of the most firms ever so why is it not working now. Well I don't know that it's not working I think it's working the problem that we have is that we need more infrastructure. If we are going to double the number of travelers in the next 10 years and we do not have the capacity to put these people in the air. Tell me what is the one mechanism that a business can use to ration scarce commodities.

There's only one thing you can do. And that is you have to raise prices. So as a commodity becomes scarce and the scarcity is in fact a government created scarcity over the next 10 years we will have to see prices go up faster. In real terms and they went down in the previous 20 years. That is the only way we're going to be able to manage to man for travel. Now we're already seeing that slot controlled airports. So if you fly into and out of Chicago here what slot controlled. Which is a scarcity created by government. You will pay higher fares than if you fly into knots non-slip controlled airports. So it's really easy the see that is we create scarcity due to a lack of infrastructure and this is what the future is. Why would there be a new start up. Want to live and be smart. Both the startups are going to have the same problem so we see AirTran

which wants to expand international cannot because there's no space. So the start ups are feeling the same pressures. At certain airports everyone else is feeling. And this this is a problem. Now startup airlines we're seeing a real interesting breed. During the 1980s we didn't see too many very good start ups we had America West which did well and went bankrupt did well in this doing poorly because it has just such awful management. We had Southwest which really is a dominant carrier in many markets now. Then in the 90s we had more successful start ups. The new millennium started out with Jet Blue which could well be the most successful startup ever annexed the southwest. But its ability to run in and out of JFK is constrained and it's

noticing now that is certain parts of the day that its operations are less efficient because of congestion. So congestion will be the biggest problem we face under airline deregulation. I in my own mind I think of this is a failed partnership where the airlines really do one thing the government has to do one thing. The government didn't ante up like they were supposed to. It's no use now pointing fingers but this is the situation and it is not good. And I honestly think it will get worse. Well it seems to me like you know her. Probably 70 percent of those passed originated from the earth. That's not part of it. So it would seem like building up some Princeton Illinois Arabs would solve a problem. Well it's an interesting thing you need to have a area with a connecting traffic and if you realize this and don't think traffic

is more expensive so you have a higher cross for connecting traffic than you do for originating traffic you she have to transfer their baggage more. You have to add additional infrastructure for them. So in order to be able to do connecting traffic you have to have a larger number of people who pay the walk up fare. Certain types of businesses in Chicago we have Arthur Andersen in all of these other large consulting firms who are willing to pay higher ticket prices to make sure they have image Tory available to them. And you have to be able to have that situation to create and run a hub. You can i just stick a hub out in the middle of nowhere you have to have a large business community to support the operations of a hub so the economics don't work of a hub other than a very large population areas. Well there are still other parts populous parents in the Midwest.

I think one of the reasons Americans wanted St. Louis is just for what you're stating. American can no longer expand in Chicago. They're kind of landlocked there and now they want to grow in the Midwest and the only way they do it was to expand out of. St. Louis we've seen certain cities like Kansas City for some reason never been able to support a hobby an airline there profitably. I doubt that anybody will look at them seriously in the future but you're certainly right we need to look carefully at how we do hopping and I do not think it is unreasonable as we get into more and more congestion that we will see the development of secondary hubs. Hartford Connecticut a non congested airport a good business community. You won't get a big hubbub she have in Chicago here. But nonetheless you could do some sort of a regional feed out of Hartford.

I'm not familiar enough with all the places in the Midwest to be able to name them. We're looking at some here. Dollar says a good bottom or Washington with Southwest's developed a very profitable hub there which is now plugging up to the southwest on success so it will be different five to ten years from now than it currently is. And I certainly agree with you that we're going to look at secondary hubs. How much different I don't know. But it will be different it has to be different because right now we're bursting at the seams. I don't think we need to be. We're a point here where we just have about 10 minutes left and I have another caller here in the hope. Last call for you me want to go on and I should also introduce Again our guest We're talking with Darryl Jenkins. He is director of the Aviation Institute at the George Washington University. And we're talking about. The airline business questions welcome 3 3 3 9

4 5 5 toll free 800 to 2 2 9 4 5 5 calling next in Belgium line number 1 0 0 0. I was wondering maybe maybe I'm naive but why couldn't an airline start. That would go from Definitely just regional airport say from very small airports like I don't know maybe someplace in western Maryland and maybe someplace in Ohio and someplace in Indiana. Just like small airports and just move airplanes from step to step. For people who might not be so concerned about getting there fast but not be always the Ray didn't you know cancel stuff. That's a perfectly reasonable question. Let me try to get into the economics of this without going into too much detail. To make money in an airline is really simple. I mean it boils down to some real simple basics. You have to put people's bodies

in airplane seats and they have to be painted a tad more than it costs to transport it. All right. Yeah the problem we have in small areas is just mass. So between two small markets. You generally don't see enough bodies to get the service that you want now. Still airlines to accommodate that use smaller and smaller planes generally at a certain point. What I found is people don't really like turboprops So we see what's happening is that in many cases the first segment of an airplane trip is a person getting into their car and driving to a distant airport rather than going turboprops knows we get regional jets that's going to some people who are nervous about turboprops that will take care of them. But the problem always is in

smaller communities having bodies now let me just so you understand how big of a problem this is. Let me give a big example. And at Washington Dulles United flies. Two flights a day to Paris. Now you would think in Washington with three million people you could do that easily. But the fact is that from the Washington area we only contribute 100 flyers. T So there are two flights and all of the other people who are on that plane going over to Paris they bring in from feed from outlying areas some of which are as far north as Buffalo New York. So the whole genius of the hub and spoke is that it kind of consolidates people in one place which makes more frequent sea available to them. And at the same time makes it possible to fly larger planes and you need some sort of a collection system

to be able to do that. Now the airlines that do a linear system like you were talking about Southwest flies from very high populated areas to other high populated areas but they do it at satellite airports within them. So in New York they fly out of the east slip in Boston. They actually fly out of Providence Rhode Island 50 miles down the road and you drive there is the first leg of your trip. So I think something is going to change. I mean we have to because we are running out of opportunities. I'm just not sure how it's going to change and that's what's going to be interesting to follow on my side over the next five to 10 years. Your question is a perfectly good one. Thank you. All right thanks just we're coming down the point here we have maybe about three minutes or so on. Unfortunately there's a lot of other things we could talk about but I want to get to the issue of the possibility that in Congress people are going to be talking about some kind

of passenger bill of rights. And in fact Ron Wyden of Oregon did draft such a piece of legislation but withdrew it last year in the hopes that barely the airlines would get there. Acts together on their own he had some partnership on this with others including John McCain. There's another Senator Harry Reid from Nevada who's sponsoring something called the airline passenger fair treatment act so people are talking about it. And according to what I read many people on the Hill say you know this year we're really seriously going to be talking about this. What do you think the possibility is that they'll move beyond talking about it and actually passing something. Well I think it's a reasonable chance that they will Here's how Congress acts when a problem exists and they're in fact the cause of that problem. They would do a lot of talking and they might even pass legislation but will be the wrong thing. It delays are a problem of capacity. Why didn't McCain and Harry Reid are the ones who over the last 10 years have had a half dozen

reports on their desk telling them about this problem. The reason we have these problems with delay is because these men have done nothing about it. So I'm sure that they will do something because this is how Congress acts and this is from someone who's lived in Washington for too long is too cynical about the process. We going back for a second to the issue of what deregulation hath wrought. And now here are the two deals we talked about the beginning of the program go through and if something happens with with the other. Bigger next bigger carriers Delta Northwest Continental we could be looking at going from a time here now where the domestic market has six major carriers two point where we might cut that in half. So you would have three and I think people would look at the intent of deregulation and say you know that wasn't the idea. There was supposed to be more competition and more choice and in fact some people would say that what happened was when deregulation began. Yes there was a move in

the right direction but that the big carriers of the time decided they were going to go out and crush the competition which they proceeded to do while the Reagan and Bush administrations essentially looked the other way. Anything to that kind of analysis. Well if you look at the big curers at the time biggest carrier during the Reagan area was Texas they're the second biggest carrier before that was an am. Those are the airlines that lost the battles making money in the airline business is very difficult. Let me show you how difficult it is over a one year period of time. Per fly. This is a just in for your heavy seasons and your load seasons. You only make money one passenger per flight. That's how sensitive airlines are to changes in load factors and so if anything happens that you don't have control over your fuel prices go up your labor gets managed.

Or there's an economic downturn in it and there are fewer people on that flight. You're going to lose money. This is one of the most difficult businesses in the world to make money at. It does not surprise me that many have failed. What surprises me is that we have as many as we do well we'll have to stop there. It's a fascinating area and I wish we could continue but we've used our time so we have to say at this point to our guest Mr. Jenkins thank you very much for being with us. I've enjoyed it immensely. Our guest Darryl Jenkins he's director of the Aviation Institute at the George Washington University which is in Washington D.C..