The trouble with the airline industry

Here in eastern Canada, the big news a couple weeks ago was that Zoom Airlines, a discount airline, suddenly went out of business. And boy, was it ever sudden. They were literally still booking flights the morning before the announcement, apparently in hopes that their creditors would bail them out.

Zoom is not the only carrier to be suffer these past few years. Skyrocketing fuel prices and unsustainable labour costs have hit the airlines hard. So is the era of cheap flight over?

Yes, that era is over, and frankly, it should have been over a long time ago. The truth is that airlines benefit from all kind of government subsidies, from tax exemptions, to protectionist barriers against foreign competition, to subsidized production infrastructure. Government patronage also leads to ridiculous situations like this.

Fares have been allowed to stay artificially low. The inflation adjusted price of airfares since the late 1970s (when the industry was deregulated in the US) has fallen by roughly half. And now that reality is setting in with the end of cheap oil, the airlines have tried to keep the illusion real, by making passengers pay for everything from headphones to pillows. To say nothing of the loss of complementary in-flight meals.

This is not working. The industry is expected to lose billions of dollars this year. And the continued existence of these basket cases have led to no end of headaches for travellers. Flight delays and cancellations are the norm in most major hubs.

So what needs to happen? First, a lot of airlines need to go out of business; no more subsidies for the losers. And those that are left need to be regulated. Minimum fares would be a good place to start. Fares need to start reflecting the true cost of air travel. We've had a free lunch the past few decades, but it turns out that travelling on a plane isn't nearly as cheap as we thought.