With as little respect as they seem to have for their customers today, I’m pretty certain I’ll never feel sorry for any U.S. airline — even when they petition me directly.
If you’re a smart reader and are subscribed to your favorite airlines’ e-news and deals mailing lists, you likely got the same plea I did, signed by the CEOs of AirTran, Alaska, American, Continental, Delta, Hawaiian, JetBlue, Midwest, Northwest, Southwest, and United Airlines and U.S. Airways. What could have brought these competitors together, moving them to address their most loyal customers in a united front? I’ll give you a hint — it’s NOT a Passengers’ Bill of Rights . . .
It is, of course, OIL PRICES. We all know airlines are feeling the pinch too; difference is, they’ve found a scapegoat on which to pin their concerns:
Our country is facing a possible sharp economic downturn because of skyrocketing oil and fuel prices, but by pulling together, we can all do something to help now. . . .
Since high oil prices are partly a response to normal market forces, the nation needs to focus on increased energy supplies and conservation. However, there is another side to this story because normal market forces are being dangerously amplified by poorly regulated market speculation.
Twenty years ago, 21 percent of oil contracts were purchased by speculators who trade oil on paper with no intention of ever taking delivery. Today, oil speculators purchase 66 percent of all oil futures contracts, and that reflects just the transactions that are known. Speculators buy up large amounts of oil and then sell it to each other again and again. A barrel of oil may trade 20-plus times before it is delivered and used; the price goes up with each trade and consumers pick up the final tab. Some market experts estimate that current prices reflect as much as $30 to $60 per barrel in unnecessary speculative costs.
Over seventy years ago, Congress established regulations to control excessive, largely unchecked market speculation and manipulation. However, over the past two decades, these regulatory limits have been weakened or removed. We believe that restoring and enforcing these limits, along with several other modest measures, will provide more disclosure, transparency and sound market oversight. Together, these reforms will help cool the over-heated oil market and permit the economy to prosper.
So we are to believe it’s not your flabby, outdated business models, your exorbitant executive benefits, your slow sacrifice of everything resembling service, your unmotivated, underpaid, overworked ground staff, crews and pilots, your failure to make capital investments, your mismanagement of resources, your lack of foresight, or your unwillingness to raise prices that has lead to this industry crisis in the face of higher fuel costs? Nor that crumbling flight-control infrastructure, overburdened hubs or even exorbitant airport charges are having a negative influence? Rather that your problems lie, in fact, in traders’ offices far away from the tarmac you’re jetting from every single day?
I don’t buy it. Every airline — with Southwest and Alaska as the leaders in this field — actively hedge a healthy percentage of their fuel prices in order to increase profits and stabilize their business with regard to future expenditures. Southwest has used its hedged-price advantage to pass savings on to customers: keeping ticket prices low, not adding or increasing fees, maintaining the modicum of service airline passengers expect. (RyanAir has followed the same model to keep its ticket prices extremely low; when its hedged advantage ran out in April, RyanAir froze executive pay and cut positions in telephone sales to decrease costs.) The hedged reserves of the other major airlines have kept them from going even further into the red. And what is hedging but a form of speculation on the future price of oil?
Neither do they. Paul Krugman (x2) and Joseph Nocera of the NY Times, Jon Birger at Fortune Magazine, James Surowiecki of the New Yorker, Tom Bergin for Reuters, The Economist Magazine, my economist friend Seth. Budget Travel’s This Just In outlined the issue before the email had even arrived in my inbox; Thursday evening (Berlin time), Upgrade: Travel Better and Cranky Flier had yet to weigh in (Mark at Upgrade has since given his opinion).
If you want to learn more, read some academic research on fuel hedging and the U.S. airline industry (1, 2) or listen to NPR’s recent reports on increasing oil prices and their effect on the airlines (1, 2, 3). But don’t send that uninformed chain letter on to your representatives simply because your airline tells you to.
Next time 12 airline CEOs come begging in your e-mailbox, what would YOU like to see in their letter? Leave your ideas in the comments below.
Read Full Post »
Americans abbreviate TSA, there is one upside to the system: once you’re in (and don’t connect in a stupid airport [ahem, JFK] where you have to exit and reenter secured areas when changing flights), you and your liquids are in. Put that chapstick back in your pocket, enjoy a long swig from your refilled water bottle — no one will bug you about those items again.
In the same “Be Prepared” spirit, such a reusable tote bag is one of the smartest things a no-budget traveler can stash in the outer pockets of their luggage or in their handbag.
If you’re stuck in the States for the time being, get thee to a Cold Stone Creamery Thursday evening: from 5-8 p.m. they’re handing out free scoops of two new creations, inspired by children from the 
Less Than a Shoestring 