February 1, 2023

Southwest’s Meltdown Reminds Us We should End Airlines’ Corporate Well being

Southwest gets billions in taxpayer money

Southwest Airlines experienced an enormous meltdown over the Christmas holiday week last 30 days, cancelling thousands of flights, plus losing track of— or outright losing— countless items of luggage.

The airline has been full of excuses, of course. Since has become fashionable for federal government and corporate screw-ups, airline management attempted to blame covid for staffing problems. Southwest also blamed the weather. It might be amazing they didn’t furthermore try to somehow blame “ Russia’s war within Ukraine “ — as the stock phrase now goes— as well.  

Yet, no other main airline had nearly the particular troubles that Southwest got in terms of either weather delays or staffing problems. Instead, the operational problems evidently stem from the fact that Southwest couldn’t be bothered along with spending money to improve its own working capabilities over the past decade. This occurred in spite of the fact that Southwest— like other major ALL OF US airlines— collected billions of dollars in bailout funds. The business then reported large income thanks in part to the funds stolen from taxpayers.  

Already, we’re hearing about lawsuits through paying customers, and fees from federal regulators. The only real solution, however— in addition to civil suits to recover real damages— lies in forcing Southwest to submit to more marketplace competition. In addition to periodic bailouts from taxpayers, Southwest— like all US airlines— is usually protected from foreign competition by protectionist US laws and regulations. Combining these protections along with bailouts— airlines got free money in both 2001 and 2020— we have an flight industry that’s complacent, wasteful, and prone to mistreating its customers.  

Mask Mandates and Southwest’s Mistreatment of its own Customers 

As stuck customers sought to reschedule their flights at the Nashville airport las week, South west employees called in the police to  threaten clients with arrest  when they didn’t immediately leave the area. The airline later stated they were merely trying to “ help” customers contact booking agents elsewhere in the airport.

Resorting to police coercion, of course , is really a tactic we’ve seen utilized by airline employees on many occasions. Perhaps, most notoriously, United Airlines employees in 2017  called within police to beat up the paid customer , David Dao, who refused to give up his seat on a trip after airline employees mismanaged booking. Some conservatives rushed to defend the airline, even claiming that United Airlines  was the victim , or insisting that the traveler   should have simply meekly followed orders .

That situation became an interesting prelude towards the debate over “ following orders” from airline employees in light of covid cover up mandates. Three years later, airlines rushed to unilaterally adopt covid mask mandates for customers, forcibly removing customers who else didn’t comply with every minute detail.

This was done without federal requires, mind you. In April of 2020,   personal airlines began imposing their very own mask mandates , and airlines were free to adopt— or not adopt— their own cover up policies well into 2021. Southwest was happy to hop on the mask bandwagon early, however , and adopted a mask policy even more stringent than those policies imposed by many governments. In Colorado, for example , the government-imposed mask mandate applied only to children eleven years of age, or older. Southwest, on the other hand, saw fit in order to impose a mask require on children as young as two years old. There was absolutely no scientific basis for this, of course , but Southwest  enthusiastically enforced the mandate , even tightening restrictions in the summer of 2020. The airline stated that even those with verifiable medical conditions preventing masking would not be allowed to fly at all.

Airline employees proceeded to  throw a good autistic 3-year old great family off a plane in one case . On another occasion a Southwest flight attendant booted the 2-year old and his mom because the  small child was taking too long to eat his gummy has . Although the mask policy was only private corporate policy at that time, Southwest’s mentioned policy was that customers not have to get given much leeway to consume: “ we expect these instances to be very short, and customers should put their face covering back on as soon as possible. ”

Southwest Gets Great in Taxpayer Money 

At the same time Southwest has been voluntarily throwing toddlers off  planes for eating incorrectly, it was receiving billions in taxpayer money as part of the federal government government’s bailout of US airlines. This was the second bailout intended for Southwest in twenty years,   an earlier bailout getting come in 2001 . In the 2020 bailout, Southwest  received $7 billion   in subsidized financial loans, grants, and tax reduction:

On April 14, Southwest announced that it had  reached a with the government  in which it is going to receive $2. 3 billion in grants, as well as a $1 billion low-interest loan backed by warrants that could thin down Southwest shareholders only minimally, even if fully exercised.

Months afterwards, in April 2021, South west announced $116 million within profits.   According to the  Chicago Tribune ,   this was largely attributable to the infusion of taxpayer money paid to Southwest: “ With no federal money, Southwest could have lost $1 billion in the quarter. ”

This doesn’t distinguish Southwest from all other major US airlines, of course.   Those airlines received  bailouts as well. Yet, regardless of its net revenues, South west did very little to address the issues of scheduling flights which usually it knew could lead to bulk flight cancellations. Southwest’s travellers were victimized twice: as soon as when their hard-earned cash was stolen by the state to pay for Southwest’s bailout, another time when Southwest trapped thousands of taxpayers  on Xmas.  

Exactly how Governments Limit Airline Competitors

It is likely that last week many thousands of Southwest customers declared “ I’ll never ever fly Southwest again. ”   Such declarations have a  way of being short-lived   when passengers enjoy few options.

Unfortunately, thanks to costs imposed by government regulations, and by federal protectionism, American airline passengers you do not have as many alternatives as they ought to.   There were  no new-entrant airlines   from 2007 to 2021, and a  small number of firms dominate the flight business in North America. Investopedia  claims   the three top carriers enjoy 70 percent of the company, and  Beauty salon and the NYT   say  the top 4 enjoy 80 percent.  

Governments limit competition in several ways, which includes:  

Moreover, the generally-high level of bureaucratization within the airline business means that airlines spend a sizable amount of hard work satisfying government bureaucracies rather than concentrating on their own customers. As Per Bylund has explained,   regulated markets kill consumer sovereignty .  

So , yes, there are multiple government-imposed constraints that indirectly limit competitors in the airline industry— to the benefit of incumbent firms like Southwest.

The particular Ban on Domestic Ways for Foreign Carriers

But there is also one big government regulation that  directly   protects all domestic air carriers from competition: the US ban on foreign carriers.   USAToday   reports :  

Global airlines   do  operate in this nation, of course , but they’re unacceptable from flying point-to-point places domestically. These laws, that are meant to protect American consumers and jobs, are having the actual opposite effect. Eliminating — or at least partially lifting — outdated restrictions could considerably increase competition and enhance customer service.

The author of the above  is definitely wrong about at least one matter. The protectionist laws removing foreign competition are not “ outdated. ” They were never a good idea to begin with. Protectionist laws and regulations such as the ban on international carriers have always preferred the owners of domestic firms at the expense of their customers.  

Were free trade permitted in the airline business, clients could potentially elect to fly on an airline the Irish carrier Aer Lingus  — for example —   between Dallas and Chicago rather than Southwest. This would, of course , drive down prices and give more choices to consumers.  

Southwest’s debacle has shown just how much more competition is needed.


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