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LAT: U.S. Airlines Under a Tax Cloud
EDITORIAL
U.S. Airlines Under a Tax Cloud February 10, 2005 A $1.5-billion airline tax hike in President Bush's proposed budget is supposed to fund tougher security measures to protect passengers, flight crews and those on the ground from terrorists. But it could be a knockout punch for some airlines already reeling from high fuel costs and cutthroat fare wars that make it difficult to raise ticket prices. The federal government was obligated to dramatically strengthen national security in the wake of 9/11, and airlines should pay a fair share. But air carriers were already hit disproportionately hard by the Sept. 11 attacks, and they're in no position now to foot an even larger bill. Domestic airlines lost more than $9 billion last year and have lost a cumulative $30 billion since the terrorist attacks. Immediately after 9/11, Washington offered cash infusions, federally backed loan guarantees and insurance assistance to keep the troubled industry flying. Despite that federal largess, two of the industry's largest competitors are in bankruptcy court and a third is teetering on the edge. The same fare wars that delight passengers keep the industry from boosting ticket prices to cover rising costs. Airlines have laid off 125,000 employees. If they can't increase revenue, they'll be forced to cut costs by laying off more employees and dropping more destinations. Even the nation's healthiest airlines are ill equipped to deal with another tax increase. Market forces are likely to shutter some of the weakest airlines, and that's all to the good because more-efficient carriers will take their place. The government shouldn't disrupt that process with more bailouts, but it also shouldn't push airlines prematurely over the brink by increasing taxes they can't afford to pay. The marketplace should decide which airlines keep flying. http://www.latimes.com/news/opinion/...,3287174.story |
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"Biwah" wrote ... EDITORIAL U.S. Airlines Under a Tax Cloud February 10, 2005 .................................................. .................... Even the nation's healthiest airlines are ill equipped to deal with another tax increase. I suspect they'd deal with one just as they have with those before, passing the increased tax through. Increased taxes/fees/etc. have hardly been the source of the airlines' fiscal pain. Market forces are likely to shutter some of the weakest airlines, and that's all to the good because more-efficient carriers will take their place. The potential problems from "shuttering" are somewhat different than than you might imagine, the potential for reduction/curtailment/ababdonment of service into a number of small and medium markets, all with vocal Congress(wo)men. WN loves to move into substantial but poorly developed/ill-served markets, while having no interest in small cities, other than those located close enough to draw pax from a "big" airport. USeless Air "pays" contract commuter carriers or subsidizes its own to deliver potential mainline traffic from many small/medium markets incapable of generating "big plane" traffic. Shutter USeless, and could you expect CO to leap to serve all of those markets? What would likely happen is bloodthirst combat between survivors to cherry pick the best of the un- & under-served destinations, a mutually destructive competitive course. .......The government shouldn't disrupt that process with more bailouts, but it also shouldn't push airlines prematurely over the brink by increasing taxes they can't afford to pay. Taxes are far less of a problem than marketing ploys, image promotion and corporate inability to understand and predict competitor actions and their effect on internal finance. The marketplace should decide which airlines keep flying. But if General Motors only built cars in lavender and puce, just as the legacies seem unable to move beyond imaginary and unrealistic service models, the "marketplace" would become less the judge than had been prejudgement based the ineptitude of GM's management. Like many other corporations, half a century ago, the legacy airlines structured themselves upon unsupportable compensation and current/potential benefit packages, along with routes and services based on prestige rather than real fiscal projections. Who knows how many (certainly a few, since the feed trough is pretty big and experience may prevent some continued repititon of past errors) will survive and prosper? Then there's the entire issue of the down side of laudable anti-trust regulation which forces airlines into the most expensive transportation alternatives. My own market would be best served by a couple of flights a day in 100 pax a/c then with a surface shuttle - operated or contracted for by a major airline, its fares "sold" as part of a conventional airticket - every couple of hours from 6AM until 10PM. From rwo and one half to three and one half hours away from two major "hubs" by ground transport, but with an actual two hoour time frame by air travel, counting boarding, deboarding and required terminal transfers, both AA and CO could easily and successfully market such a service if they "ran" it and could sell combined travel, now illegal under federal law as I understand it. TMO |
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The marketplace should decide which airlines keep flying.
That depends on where you live. If you live in one of the 50 (an arbitrary number) largest cities, you will always have an airline or three doing business in your city. But if you live in some tiny city and the local airline goes out of business, you now must drive to the nearest city with air service (with Bush trying to eliminate Amtrak, that will no longer be an option soon). In the old days, those small cities were subsidized by flyers traveling to larger cities. Deregulation has a price. I live in a hub city, so I don't really care, but I would have a different attitude if I lived in a small city. Casey |
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