RESPONDED ON NOVEMBER 30, 2009 7:34 AM


### Robert 

### L. Crandall, Retired Chairman and CEO, AMR and American Airlines

The first question the LaHoodAdvisory Committee should consider is why the United States has no national airtransportation policy (Let's call it a NATP to save space and time). Given the performance ofthe U. S. airline industry, and the country's obvious need to reduce its use offossilfuels, it is hardto understandthe absence oflongterm planning. Unfortunately, as former U. S. DOJ antitrust official Joel Kline observed in his
recent and excellentbook "Politics Lost", we seem to beliving in a periodwhen "the very notion ofplanning, especiallyplanning for the common good, seemsvaguely socialist".

In the 31 years that have elapsed since the U.S.airline industrywas deregulated, the industryhas lurched from crisis to crisis, and its performance has declined byvirtually every measure. Year afteryearthe industry's financial situation grows more desperate, it provides fewer goodjobs, its employee relations worsen, its customer service deteriorates and its international competitiveness declines.
Unhappily, the U.S. has neverbotheredto puttogether what corporate America would call a mission statement or, in simple terms, a definition ofthe air transportation goals of public policy. Just what is it we want the airline industryto do?

Since 1978, we have behaved as ifwe want nothing otherthanthe lowest possible fares, and ifthat is so, we might plausibly claim success. But is that really the case? Are we interested in having a financially sustainable air transportation system and in keeping small and mid-size communities connected to the rest ofthe countryandthe world? Do

we want our airlines to provide well-paidjobs and a secure careerpath for the men and

women who serve the public at airports, andfly and maintain the aircraft we travel on? Do we want U.S. carriers good enough to compete on the world stage? Do we want to minimize both fuel usage and carbon emissions?

Ifthe answers to those questions are yes, then we need to develop public policy objectives and a framework for strategic analysis which is far different from the path we have followed since 1978, and which is free ofideological convictions about the virtues of unregulated competition and regulatory oversight. I I jIfwe can assume thatthe LaHood Committee does come up with an NATP whose objectives include saving money, conserving fuel, providingbetter service to travelers, offering goodjobs andbeing more competitive on the world stage, the second question it should ask is "Why is the U. S. air traffic control system so antiquated andwhat can we do to fix the problem?".

I doubtthere is anyone with an in depth knowledge ofaviation thatdoes not believe our 20th centuryair traffic control system is broken andbadly needs replacement. Our system contributes to congestion, costs too much, drives excess fuel use and unnecessary emissions andlimits growth. Itneeds fixing, andbecause financing, development and implementation are heavily impactedbypolitics, it's getting fixed far too slowly and inefficiently. Unfortunately, because the airlines andthe general aviation community have been unable to agree on how the air traffic control system shouldbe financed, because Congress hasbeen unwilling to give up control ofsuch minutia as where FAA facilities are located andbecause the union representing air traffic controllers would rather negotiate with Congress than with a professionally runbusiness, the U. S. is virtually alone among advanced countries in nothaving created a fee financed, commercialized, professionally run air navigation service provider.

Given the many constituencies that would be impacted, fixing the problem won't be easy. However, a long series ofstudies, commissions and taskforces dating back to 1985 have all reached the conclusion that creating some form ofa professionally managed, user governed, fee based organization is needed to assure the continued adequacy ofour air traffic control infrastructure. So this task force should avoid the inevitable temptation to launch still more study ofa problem that is already well understood. Instead, it should recommend that the administration embrace the concept, andbring to bearthe political

resources necessary to find a prompt solution.

The third problem on the Committee's agenda should be the issue ofover scheduling. In the intensely competitive airline industry, individual airlines cannoteffectively limit the number offlights scheduled at congested airports. Considerthe reality that in the absence ofgovernment imposed flight limitations, an airline that reduces the number of flights it offers at a congested airport is very likely to see anything it cancels replacedby additional flights offeredby a competitor. Since planes leave an airport on a first come

- first servedbasis, an airline which reduces the number offlights it offers will not reap the rewards ofmore on time departures, particularly ifother airlines add more service at approximatelythe same times as the flights that were cancelled. However, because competing airlines will now offer travelers greaterfrequency, and thus a wider range of arrival and departure options, the cancelling airline is likely to lose both market share and revenue.Over scheduling imposes unnecessary delays ontravelers, drives excess fuel usage and unnecessary emissions and costs the airlines money. Thus, it is difficult to see why the FAA has resisted imposing mandatory schedule reductions atthose airports where there

are more flights than the physical facilities can readily accommodate.

The Committee should recommend thatthe FAA be directedto come up with a way to limit the number offlights at any given airport to the numberthat can be operated on time in normal weather conditions, thus improving ontime performance, reducing delays for travelers andconserving both fuel and dollars.

The fourth serious problem to which the Committee should turn its attention is the airline industry's deplorable labor relations. The industry operates under the provisions ofthe Railway Labor Act, which facilitates corporate wide organizing and which seeks to minimize the probabilityoftransportation strikes by imposing various mediation and arbitration options onboth labor and management. Moreover, because the industry operated as a regulated utility from 1938 to 1978, because itbecame widely organized in the years immediately afterWorld War II, because ithas always been the subject of patternbargaining, andbecause airlines are uniquely unable to bearthe impact of strikes, airline employees until very recent years enjoyed compensation well above that paidfor similar skills in otherindustries.

All these conditions have created nearly constant stressbetween airline labor and airline managements. That stress, which has been heightened in recentyears bythe adverse' impact ofderegulation onthe country's legacy airlines and has been recently exacerbated by the impact ofa severe recession, has clearly had an adverse impact on airline service levels and on airline financial performance. Something better is needed, andthe Committee should examine every possible approach to improvement.
Finally, the Committee should examine the question ofwhether the goals ofa NATP can be realized by an industrychronically unable to earn anything approaching satisfactory financial returns. The airline industryis extraordinarily capital intensive, and to assure both satisfactory performance and optimal safety, must consistently invest large sums in training its employees. An industrywhich dpes not attract long term investors, and whose securities are widely regarded only as tradingvehicles, cannot offer the attractive

careers soughtby the high quality employees airlines need and want, contributeto mitigating the country's excess use ofenergy, buyand operate the modern aircraft
customers prefer, orfinance the competitive international services required to be an effective global competitor. Thus, the Committee should address the question ofwhy this important industry is unable to earn satisfactoryfinancial returns, andpropose alternatives to remedy the problem.