Other People’s Money
A couple of months ago, my son announced that he “needed” this particular red sweatshirt. It was absolutely vital that he have it. In fact, civilization as we know it might actually end, should he not get this shirt. Since I know that he has a closet full of sweatshirts, albeit none of them red, I didn’t see this as a crisis of need, more like a crisis of want. In the interest of saving civilization, I told him that we could pick that up on our next trip to the mall; however, he would need to pay for it out of money he’d earned. Hold the phones! Money he’d earned?! Magically, the crisis evaporated; the sweatshirt was no longer needed. Civilization was saved.
Last week, US Airways CEO Doug Parker announced that maybe the airlines don’t need the NextGen ATC system they’ve been clamoring for. ATW Online quotes Parker as saying at the carrier’s media day in Phoenix,”There is not a capacity issue in the United States right now as it relates to air traffic control, so putting in place NextGen ATC, while it makes all the sense in the world, isn’t going to save the airlines dramatic amounts. . .So our position is so long as we have to pay for [flight deck equipment], we prefer not to have it.” And a recent Washington Post editorial indicates that US Airways is not alone in it’s unwillingness to foot the bill to retrofit their fleets with the necessary equipment. In a rebuttal to the editorial, the Air Transport Association’s James May says that the article misses the point, that airlines are already paying billions in taxes into the Airport and Airway Trust Fund and that the FAA is the one who will realize multiple millions in savings; so, the government should be the one to pay for aircraft upgrades.
The logic eludes me on this one. Why should the government pay to upgrade a private asset, even if the upgrade is to allow the asset to communicate with a government infrastructure? The funds in the Airport and Airway Trust Fund won’t cover the costs of building, launching and maintaining all of the satellites required for the improved ATC system. Personnel retraining, alone, is going to be a massive government expense. In the end, overall savings will eventually cover these costs. The airlines have lobbied for NextGen implementation saying that the more direct routes will reduce fuel costs, allow for better fleet utilization and, perhaps even reduce the number of ATC delays, allowing the scheduled airlines to operate more efficiently. They should, therefore, be able to operate more profitably. May doesn’t believe that airlines should pay for decreased government costs, but he somehow thinks it makes sense to require that the government (or better yet, general aviation through user fees) should have to pay for decreased airline costs? Again, I fail to see the logic.
Interestingly, the Washington Post editorial points out that, in 2007, Southwest Airlines was the first carrier to commit to using its own money to retrofit its aircraft and that more than 60% of their fleet will be NextGen ready within the next few weeks. Who has more credibility here - US Airways, a carrier that has lost money hand over fist for the past several years or Southwest Airlines, a carrier that has used innovative practices to turn a profit during the same time period?
Whether it’s a teen-ager, a corporation, or a government, it’s always easy to spend other people’s money. You can easily measure commitment to a belief or project when you see how many of their own resources an entity is willing to use to see it through.
In this case, it looks like only the airlines that are interested in operating even smarter are the ones that are already the most profitable.
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