henry6 In reporting the bankruptcy of American Airlines last night, Scott Pelley on CBS Evening News stated that the airline industry had lost $34 million dollars as a whole and I think he said since 1951. Date doesn't matter as much as two other points. I question the amount of money..$34 million seem like an understatement or underestimate, I would think it would be more, especially since 1951. He also commented that the figure meant that the passenger airline industry has never made money. With that statement comes the question, since the Federal government subusidizes the ailrine industry and operates its traffic and terminal systems without demanding that the industry make money, why does that same government demand that Amtrak make money? Note, too, no governtment in th US looks for any kind of profit report from trucks and buses whose rights of way are all provided by every level of government.
In reporting the bankruptcy of American Airlines last night, Scott Pelley on CBS Evening News stated that the airline industry had lost $34 million dollars as a whole and I think he said since 1951. Date doesn't matter as much as two other points. I question the amount of money..$34 million seem like an understatement or underestimate, I would think it would be more, especially since 1951. He also commented that the figure meant that the passenger airline industry has never made money. With that statement comes the question, since the Federal government subusidizes the ailrine industry and operates its traffic and terminal systems without demanding that the industry make money, why does that same government demand that Amtrak make money? Note, too, no governtment in th US looks for any kind of profit report from trucks and buses whose rights of way are all provided by every level of government.
Whether the airline industry has made money since the dawn of commercial aviation is a moot point. Whether an airline has made money long enough to provide a vital service is the key question. And whether individual airline companies attract enough private capital to continue operations. The same concept applies to railroads, bus lines, steam ship companies, retailers, etc.
Factor in all the failed enterprises and your likely to find that many lines of business, in the aggregate, have been failures. Yet out of the dust heap will be a few very successful enterprises. Over the long run, if the criterial used by CBS was applied to the business world, one could say for the most part that all industries, including the railroad industry, have never made any money. For example, over 50 per cent of the start-up businesses in the U.S. fail within five years and more than 70 per cent are gone after 10 years. Failure? Not for the ones that got it right! Bad news for the majority that got it wrong.
Go back to the dawn of the railway age, factor in all the railroad bankruptcies, and you get a picture similar to the airline industry. Commercial transport is a tough nut to crack no matter what form it takes. Those who decry use of Chapter 11 by the airlines seem to have forgotten the heavy use of it or similar provisions by the nation's railroads.
The notion that the commercial airlines are subsidized by the federal government is largely a canard. Outside of the Essential Air Services Program, the federal subsidies per passenger mile to the airline industry are paltry compared to the subsidies for passenger rail. NARP as well as others consistently imply that the transfers from the general fund to the FAA go exclusively to the commercial airlines. The assertion is incorrect. Most of the subsidies, i.e. FAA operations, airport facilities enhancements, etc. go to general aviation, which accounts for approximately 70% of the FAA's activities.
The federal government through the FAA operates air traffic control. It does not operate the airports. Most of the airports in the United States are owned and operated by local authorities. They are expected to cover their costs through ticket fees, parking fees, FBO and vendor rentals, etc. And with the exception of a few rural airports, which may be subsidized with local funds, they do so.
The federal government does not guarantee any business outside of its sponsored commercial enterprises, e.g. Amtrak, Fannie Mae, Freddy Mac, FDIC, USPS, etc. a place in the sun. Prior to de-regulation of the airlines, the government used its regulatory powers to fix prices and assign routes, which fostered the continuance of poorly managed airlines and prevented millions of people from having access to affordable air service. That all changed with de-regulation, which amongst other things meant that millions of people who could not otherwise have done so could go home for the holidays or whoever they wanted to go. Along with de-regulation came risk. And many of the carriers, e.g. Pan Am, Eastern, etc. could not manage it. And they went under. No one bailed them out. In fact, the only form of commercial passenger transport that has been bailed out by the federal government, to the best of my knowledge, has been passenger rail.
Trucks and inter-city bus operators are commercial enterprises. They share the nation's highways. They pay user fees to use the roadways. Depending on whose analysis you want to believe, there is evidence that they pay their fair share.
Anyone who thinks that people are going to give up the advantages of aviation, especially for a trip of more than a couple of hundred miles, to ride a train is out of touch with reality. Airlines will come and go, as is the case with most businesses that provide a service that people want, but we will have commercial air service just as we have commercially generated electricity.
Passenger trains make sense in relatively short, high density corridors, where the cost of expanding the highways and airways is cost prohibitive. There are not many of these corridors, and there are not likely to be many for at least 50 to 75 years.
Ideally, each mode of transport should reflect its true cost at the price point, i.e. ticket counter, pump, etc. If that miracle could be pulled off, passenger trains might be able to make it in a few corridors, providing their business model is changed.
Henry,
The reason is that airline stockholders and bankers absorb the airline operating losses but the government itself absorbs the passenger train operating losses.
Mac
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