The Airline Industry and its Future

Right now I’m sitting on an American Airlines flight from Chicago to Dallas with some friends as we continue our travels for Spring Break. As we were walking through the terminal at O’Hare airport, my friends decided to highlight just how much I seem to know about airplanes, the airlines, airports, etc. Whether it was to make fun of me or not, we all realized how much I really do know. In that moment I looked back on the years that I’ve been flying and following the industry and for once I was surprised too at how much I know. I guess that’s one of the reasons I started this blog in the first place; to share that knowledge with others who are not knowledgeable. Thus, since I’m on a commercial airline flight and I have some down time, I thought it would be an appropriate moment to share my thoughts on the airline industry. I will explain the pros and cons of the airline industry, why the airline industry is the way it is today, and finally what the future holds for the industry. Get ready to read, this is a long one.

The advantages of the modern airline industry can be somewhat obscure, but certainly the greatest advantage is that it provides cheap travel for the masses. To emphasize this point, I’m going to take you back in time, when the airline industry was still relatively young and the words “air travel,” “glamour,” and “romantic” were still used in the same sentence. These were the days of airline regulation. Believe it or not, the United States government regulated the airlines almost entirely up until 1978, when President Jimmy Carter signed the Airline Deregulation Act. During this time, the Civil Aeronautics Board (CAB), a division of the Treasury Department charged with overseeing commercial air travel, mandated to airlines which routes they could fly, how frequently those routes could be flown, and most importantly, how much they could charge for fares. One can imagine that with so much oversight and control by the government, there was little competition. For example, the modern airline passenger has a choice of at least half a dozen airlines to fly from the east coast of the U.S. to Europe. In the days before deregulation, a passenger had far fewer options, when airlines like Pan Am dominated the Atlantic. As a result from less competition, airlines had higher fares, fares that the mainstream public could not afford.

After 1978, the airlines were essentially freed from government control, allowing them to establish their own fares, fly routes that were once dominated by a single carrier, and of course the CAB was abolished since it was no longer necessary. Essentially, airlines and their passengers were exposed to market forces. As a result, this is also the time when low-cost carriers like Southwest Airlines began to emerge because they were able to compete effectively with their low fares that were previously prohibited. With more competition, fares dropped dramatically and all of a sudden the average American family could afford to fly across the country or even around the world. In 1996, the Government Accountability Office conducted a study that concluded that the average airline fare was 9% lower in 1994 than in 1979, which is nearly a 30% drop when adjusted for inflation (See Airline Deregulation Act of 1978). In my opinion, this did wonders for the American and global economy simply because it opened travel up to the masses. The businessman who was once stuck to his office making deals over the phone could now easily fly to meet his client across the country. Families could fly to other cities on vacations, increasing tourism revenues. In short, the world shrank. The airline industry also became more efficient by being able to lower their costs dramatically and shifting larger aircraft to longer, busier routes while smaller aircraft began to be utilized on short-haul routes.

The disadvantages of the modern airline industry can be somewhat numerous and overwhelming, but perhaps the greatest disadvantage is that it provides cheap travel for the masses. Don’t worry, you’re not reading double. Think of it this way, before 1978, the airlines catered exclusively to those who could afford its higher fares. The majority of the passengers were premium customers who received excellent onboard service that is not seen today even on the most highly regarded carriers. Gone are the days when 747s had piano lounges on its upper level and passengers socialized by eating their meals at a spacious table instead of in a cramped economy class seat with a foldable tray table. By having more spacious premium seats, aircraft and airports were less crowded, thereby increasing convenience and ease of travel. Let’s not lie to ourselves either, we know that the majority of airline revenues come from premium sales and not from economy tickets, no matter how many of those seats are filled. Therefore, even though it was still tough to make money in the airlines (and it always will be), making a profit was easier back then compared to today when the sole focus of the airlines is to cut costs in order to provide the lowest fare, and not to mention that one of the purposes of the CAB was to make sure that the airlines had a “good rate of return.” Just the thought of charging for checked baggage, food, drinks, pillows, or blankets to generate revenue back then was sacrilege. Now it is a common practice as the companies are desperate to cut costs, boost revenue, and provide the lowest fare to compete with low-fare kings like Southwest, Jetblue, and others. Furthermore, with increasing numbers of air travelers, the antiquated air traffic control system is literally being flooded and saturated with too many aircraft, especially in cramped and busy airspace along the east coast. As a result, delays and cancellations become more frequent. To sum all of this up, the modern consumer is actually the one to blame for all of the inconveniences of modern air travel. We wanted cheap travel for the masses and these are the consequences.


The previous paragraph provides a good transition into my explanation of why the industry is the way it is today. I already mentioned that airlines are constantly in cost-cutting, revenue-boosting mode in order to provide the lowest fare possible. This has created an environment in which airlines seek any route to compete. How do airlines do this? There are multiple strategies, including mergers, alliances, code-shares, anti-trust immunity, and others. Many of these strategies have been publicized in the news lately. For example, Delta Airlines and Northwest Airlines recently completed a merger that made Delta Airlines the largest carrier in the world, surpassing American Airlines. The merger opened up a plethora of routes and money-making opportunities for Delta since the previous route maps complimented each other rather than overlapping each other. Northwest had an extensive network in Asia while Delta’s niche was in Europe. Now Delta is a strong carrier on both fronts while other carriers are forced to compete once again by lowering their costs, which may be in the form of another merger (See ALPA Chief predicts more consolidation). If mergers go by smoothly and without much opposition, the result can be very lucrative, as the Delta-Northwest merger seems to be. However, many mergers tend to run into trouble or don’t go as planned (see U.S. Airways-America West merger and American-TWA merger) and resolving the issues can go on for years, costing the company a fortune.

Another publicized example is the anti-trust immunity (ATI) sought by alliances and carriers on certain routes. For example, American Airlines, British Airways, and Iberia of Spain are seeking anti-trust immunity from the U.S. government and the European Union in order to join together to share routes and revenue, thereby increasing their share of the trans-Atlantic market. Other carriers like Virgin Atlantic oppose this move because its CEO Richard Branson believes it will decrease competition and raise fares. In my opinion, Richard Branson is scared to compete because he knows he will have to lower the fares on Virgin Atlantic. These ATI approvals are being sought throughout the industry, as United, Continental, and All Nippon Airways of Japan requested ATI approval across the Pacific Ocean while American Airlines also seeks approval with Japan Airlines.

In addition to alliances, mergers, and anti-trust immunities, airlines seek more revenue through unpopular fees like charging for snacks, checked baggage, exit row seating, etc. However, many of these charges only apply to economy passengers since their tickets actually don’t generate much revenue for the airlines. That is why premium passengers (First and Business Class flyers) do not usually pay the same fees, because their tickets are the airline’s largest source of revenue.

The beginning of the 21st century has been one of the toughest downturns for the airline industry. The culmination of the September 11 attacks, high oil prices, and the recent recession in the United States caused the airlines to lose billions of dollars collectively since the millennium. To counter these challenges, the airlines have once again reverted to extreme cost-cutting which saw the introduction of baggage fees, fluctuating fares, less service for economy class passengers, etc. Despite the critics, I will say that I believe the airlines have started this decade leaner, more efficient, and with lower costs. Thus, they should be better positioned to post better results in the coming years. However, that doesn’t mean that they don’t have challenges awaiting them.


Cost cutting was important in the past, it’s important now, and it’s certainly a top priority in the future for all airlines. To those not familiar with the airline industry, I don’t believe you can truly understand how difficult it is to make a profit with today’s airlines with paper thin margins. Thus, it doesn’t take a rocket scientist to know that in order to make money, the airlines are forced to take drastic measures to keep costs down. This past decade should have taught the airlines how to do exactly that, so in the future they should be able to maintain the same discipline. However, the cost-cutting mindset can have drawbacks as well since the concept also applies to salaries of the thousands of employees the airline has, especially pilots, flight attendants, and mechanics. Those groups are the least likely ones to endorse the cost-cutting idea since they have already been dealing with 30% or larger pay cuts.

If the next few years are friendly to the airlines, the companies need to focus on investments that spur innovation and efficiency in the company. To emphasize this, I like to use Southwest Airlines as an example. In my opinion, Southwest Airlines is a model for how an airline should work. They are young, innovative, energetic, and have one of the strongest corporate cultures I’ve seen. Not only do they normally provide the lowest fares on a particular route, but the crew is normally exceedingly friendly and even funny (See Singing Flight Attedant) because the company takes care of their employees. They also offer a consistent product and level of customer service that is hard to find among the legacy carriers like American, Continental, United, etc. Of course, with its low fares, Southwest can enter almost any market and compete very effectively. For example, Southwest’s dramatic entrance into the Denver market forced both United Airlines and Frontier Airlines, both of which have hubs at the mile-high city, to lower their fares. When oil prices were on the rise following the September 11 attacks, Southwest had already hedged very effectively, paying $35 per barrel when larger carriers were paying double that price. Lastly, Southwest’s operations are very efficient. For example, they are able to turn their planes around on the ground in as little as twenty minutes, allowing the planes to be in the air more. After all, a plane sitting at the gate doesn’t earn any money for the airline. One can argue that this is an advantage of utilizing the point-to-point route system instead of a hub-and-spoke system used by most carriers today. Also, they’ve kept true to their word about not adding any hidden fees, such as for baggage, making their fares all the more attractive. As a result, they actually gained a bit of market share. To end, one can say that Southwest Airlines is the Wal-Mart of the airline industry; it’s the one figure in the industry that makes the environment more competitive by lowering its costs and prices and thus they change the game for everyone else.

Some other challenges the airlines will face in the near future are the transitions to a new air traffic control system (NextGen) and to new ‘greener’ fuels. As I already mentioned before, our antiquated radar-based air traffic control system is becoming overwhelmed with the growing volume of aircraft seen every day. Since the system is radar-based, aircraft can only get so close to each other. Furthermore, the aircraft are stuck to jet airways that are like highways in the air. With a satellite based system that NextGen offers, aircraft will be able to fly within a closer proximity of each other and will be able to fly more direct routes instead of flying point-to-point along the jet airways. Additionally, the system would be more environmentally-friendly because aircraft would theoretically be able to perform constant descents at idle power to landing instead of the current ‘step’ descents where aircraft descend to an altitude, then wait, and descend to another lower altitude. Some of these features have already been implemented in the air with RNP technology, which is a very precise form of navigation using GPS and satellite navigation. The technology is also slowly being implemented at airports around the country (See Philadlphia Airport adds ADS-B technology). In a nutshell, NextGen is absolutely essential if airlines and the flying public want efficient and steady growth in traffic.


The use of greener aircraft fuels has already started, but mass distribution is yet to be seen. Numerous airlines have flown test flights using new fuels, ones that include mixtures of diesel fuel, oils, and even a type of algae. Other forms of these biofuels are still being tested as airlines seek a cheaper alternative to petroleum-based jet fuel.

I will admit that this report was a largely corporate standpoint of how the industry functions. Certainly, opinions differ when among the employees of the airlines who, for the large part, are dissatisfied with the gross changes the corporations have undertaken and feel cheated by their colleagues. However, that discussion falls under the category of the life of an airline pilot which I plan to write about in the near future.

In addition, although the airline industry may seem very deregulated from this article, it is in fact still heavily regulated in some aspects. Some experts say that it is the, “most regulated deregulated industry.” For example, some major airports around the world are still regulated with the intent to control congestion by using the slot system. Some of these airports include La Guardia in New York (LGA), Kennedy in New York (JFK), Chicago O’Hare (ORD), Reagan-National in Washington D.C. (DCA), and London-Heathrow in the United Kingdom (LHR). Also, many international routes are still regulated. For example, U.S. airlines must seek government approval for routes to countries like China and Japan. These route restrictions are often the result of competition laws, but politics also play a role without a doubt.

To summarize, the 1978 Airline Deregulation Act is one of the leading factors to why the airline industry is the way it is today. It exposed the airlines to market forces, forcing them to cut fares and costs in order to compete, which boosted passenger numbers. At the same time, the larger volume of passengers created the problems we see today like delays and crowded aircraft. Therefore, the passengers deserve some of the blame when it comes to today’s problems with the airlines. Furthermore, the industry has become one hell-bent on cost-cutting and does so through mergers, alliances, anti-trust immunities, etc. Again, the future of the airlines seems largely focused on cost-cutting, but in order to succeed they must also focus on innovation and efficiency that modern low-cost carriers exhibit. Furthermore, they must be able to adapt to a changing environment that involves a transition to a next-generation air traffic control system and renewable fuels.

Now I’m on the flight back from Dallas to Ann Arbor, and I’m sitting next to my friend who is listening to Lady Gaga for the fifth time in a row. In the words of the pop-singer, the relationship between anyone and the airline industry is like a “Bad Romance” (A+ to Brittany for coming up with that one).

Thanks for reading everyone! As always, if you have any questions, comments, feedback, or ideas for another topic, please doesn’t hesitate to email me at mike_stangy@msn.com. Also, be sure to visit my youtube page for new videos along with my flickr page for new photos (both links on the right side of this page). Feedback is always appreciated on those sites as well.

Instrument Rating

I received some feedback from Thomas, another young pilot who wrote the following in an email to me:

Hey Mike

I am currently working on my Instrument Rating, cannot wait to get that checked of my list, than probably my Commercial. What did you find the toughest when working on your Instrument?

In this post, I will write about what the Instrument Rating is like, what it took to obtain my Instrument Rating, and I will highlight the most challenging aspects.

Any pilot who has his Private Pilot license can obtain the Instrument Rating after meeting the FAA requirements. Unfortunately, I let a friend borrow my book of Federal Aviation Regulations, so I cannot list each specific requirement now. However, I do know that you must have a certain amount of cross-country flying time, classroom time on the ground, and time conducting approaches and holds to list a few. To the new Private Pilot, all of this may take time to acquire since Instrument flying is rather different than a typical flight in VFR (Visual Flight Rules) conditions.

First of all, flying by reference to your instruments can be difficult to become accustomed to because you are flying ONLY by reference to your instruments. To the readers who aren't pilots, imagine you are sitting in a cockpit and someone blocked out your windows so you can't see outside and you can only look at the instruments in your cockpit. That's essentially what instrument flying is all about. You must be able to fly the aircraft safely without reference to the ground. How would you figure out where you are? Where you're going? How long it will take you to get there? What will you do if one of those instruments fail?

In fact, pilots who are training for their Instrument Rating will wear "foggles", a type of goggles that the trainee pilot will wear so that he/she can only look down at the instruments while the instructor watches outside for any traffic.

In my response to Thomas, I wrote that the Instrument Rating requires that the pilot think a lot further ahead and conduct more planning. For example, I never conduct an instrument approach to an airport without briefing myself and the other pilot if one is present. Instrument approaches are rather complex, so I want to make sure that I understand exactly what I need to do, what I should not do, that I have the right frequencies in my radio, and that I know what to do in the event that I have to abort the approach. Whenever I need to conduct a hold, I'll always brief myself over what type of entry I need to conduct, which direction I will make my turns, how long my outbound legs are, and I will take note of the wind direction and speed for course correction.



The Instrument Rating also requires better decision-making skills. What if the weather at your destination is close to the minimums required for the approach there? Will you go? Are you sure that you are comfortable flying in those conditions? If you do go, what are your options in case you are unable to land at your intended destination? It's always better to ask yourself as many questions as possible and have a strong answer for each of them. But remember, a good pilot makes good decisions to avoid situations which require superior decision making skills.

That's a good segway to my next point: personal minimums. Just like any other pilot, I learned that just because the plane is able to fly and the pilot is legally able to fly doesn't mean a flight should be conducted. The sooner a pilot learns this, the better. For example, if the cloud ceiling was 0ft and the visibility is 0 miles, I can legally go to the airport and take off since I have my Instrument Rating. Is that a good idea? NO WAY. First of all, I do not feel comfortable flying in conditions as low as those. Second of all, I would not be able to legally land anywhere with similar conditions. Every Instrument pilot should have is own personal minimums that depend on: the type of plane to be flown, the pilot's level of experience, and more. My personal minimums are 500-600ft cloud ceiling and a 1.5mi visibility. Also, I don't feel comfortable flying by instruments if the wind gusts at either airport are over 21kt.

Since Instrument flying involves flying in weather below VFR minimums, Instrument pilots must, not surprisingly, be taught the concepts of weather. This includes weather patterns, convective weather (thunderstorms) along with the signs to predict them, icing, and much more.

So now I will cover my journey to obtaining my Instrument Rating. What I remember is that I spent a lot of my time building time to meet the total time requirements for the checkride. Those time building flights were most often cross-country flights that I flew along with my instructor as simulated IFR. In other words, the conditions weren't always IFR, but we filed a flight plan for each flight and I wore the 'foggles' as well. That allowed me to gain a lot of experience as an Instrument pilot and gain time as well. I don't remember having too much difficulty with the training because at that point I had been flying for five years and thus I didn't have trouble flying the plane. Furthermore, I was already knowledgeable about a lot of Instrument-related topics and concepts.

As the checkride got closer and closer, my instructors had me focus more on approaches, holds, regulations, and more specific aspects to prepare for the practical test with the FAA examiner. This is when I really got proficient on my approaches and I felt really prepared for the practical test because of this.

To sum it all up, a pilot must learn to consistently shoot approaches well, make good decisions, and learn about weather to obtain an Instrument Rating. It's definitely worth it because you further your knowledge of aviation and you become that much better of a pilot. Of course, you're also extended more privileges and the benefits that come with them like being able to fly more frequently, enjoying the view above the clouds, etc. In my opinion, no Private Pilot's license is really taken advantage of unless the Instrument Rating accompanies it.

Once again, thanks for reading. If you have any questions, comments, or suggestions for another topic, send me an email to mike_stangy@msn.com. Also, be sure to check out my flickr site for photos and youtube page for some videos (links on the right side of this page). Comments are also appreciated on those sites.

Fear of flying

So, I am finally writing about the fear of flying. To some it's a touchy subject because it just hits home. It's that fear that causes people to squeeze their armrest during takeoff or landing. It's that fear that makes people pay more to drive somewhere than to fly. What I want to know is, "why?" Naturally, as a pilot I cannot understand this fear, where it's foundations come from, or why it is mentioned when there are so many other dangers we face in our everyday lives. Quite frankly, it annoys me. Through this post I hope to offer my point of view and offer some comfort to those who find air travel uncomfortable.

How would you define fear? Besides that physical gut-wrenching feeling, how would you describe it in words? Some common definitions are, "a distressing emotion caused by an impending danger," or, "concern," or, "anxiety." However, I would like to offer another definition that applies to the fear of flying. I would define fear as an irrational human response to the unknown. In other words, a lack of knowledge causes fear. For example, I would say that some people are afraid of ghosts not only because of their 'scary' appearance, but also because their origens or how they came about are unknown. If we know how ghosts exist or where they come from then perhaps we wouldn't be so afraid of them. People may be fearful of other people's cultures because they know little about it, when in fact that culture is anything but threatening.

With respect to flying, passengers don't know everything that is going on during every flight and thus when something strange occurs or if their gut says something is wrong, fear takes over their mind. However, through all of my years in school, I've learned that human instinct is wrong more times than it is right. I guess the only thing I can say about this is that if something's wrong, the flight crew WILL let you know. When the airlines say their top priority is the safety and comfort of their passengers, they're not kidding. They are professionals who train twice year, sometimes more (even doctors don't face recurrent training), to be sure that they are up to date with the correct procedures and to maintain proficiency. These flight crews are tested to their limits and face training in many more and complicated emergency situations than one would experience in an entire lifetime. Do you know what happens if they fail? They lose their job. Bottom line: trust your flight crew, even if they don't greet you with a warm smile, because I guarantee that they know what they are doing and they have the experience to prove it.

Air safety is not some unorganized network that is rarely enforced. The Federal Aviation Administration (FAA) has its own set of Federal regulations dictating what must be done to ensure safety before flight. If an airline does not comply, they are simply breaking the law. I wish you could see the book of Federal Aviation Regulations (FARs) sitting on my desk. It's two inches think with small text and two columns per page (front and back), covers everything from unmanned balloons to commercial flights, and keeps getting thicker. For example, you know that announcement flight attendants make before every flight that your baggage must be stowed in the overhead compartment or underneath the seat in front of you? Well, that's actually a federal regulation. FAR91.523 specifically says, "No pilot in command of an airplane having a seating capacity of more than 19 passengers may permit a passenger to stow baggage aboard that airplane except under a passenger seat in such a way that it will not slide forward under crash impacts severe enough to induce the ultimate inertia forces specified in part 25.561(b)(3) of this chapter." You see how specific that is? When a company like Boeing manufactures an aircraft, they also must abide by these regulations during the construction. That's a good segway into my next point. Bottom line: although it's a government organization, trust the FAA and its regulations.

Aircraft are manufactured and engineered to be safe. I know this may be hard to believe, but people are smart. Smart enough, in fact, that they can devise a way to make thousands of aluminum tubes fly at high altitudes and subsonic speeds with a very very very very very very very tiny rate of failure. Additionally, they are tested FAR beyond their operating limits. Take the new Boeing 787 as an example. It just conducted its first flight about a month ago, and it is not even close to its first revenue flight. In the next nine months, it is going to experience situations inflight that will likely never happen under normal circumstances. During these flights, technicians are collecting momentous amounts of data through their computers that relay even larger amounts of information. Take a look at this video as well: Boeing 777 wing test. This video was taken in 1995, when the Boeing 777 was still in testing. Here, the aircraft is undergoing its wing flex test. All wings bend or 'flex' a little inflight because more load is placed on them than when the aircraft is on the ground. In the video, cranes are attached to the wing tips and pull the tips up vertically to simulate extreme conditions. The wing structure does not rupture until it reaches 154% of its design limit. That's smart engineering at its best. Bottom line: trust the engineers and designers because they're smarter than you.

Lastly, trust the numbers. This one bothers me the most by far. Countless studies confirm that air travel is the safest form of transportation, but yet people still fear air travel. I don't care what doubts you have about statistics. I have my doubts too sometimes about them but I have to agree with them when it comes to air travel. Statistically speaking, you have to fly every day for 20,000 some years before you are involved in an aircraft accident. How many people died in car accidents in the U.S. 2008? The National Highway Traffic Safety Administration's estimates show that 31,110 people died in crashes from January through October of that year. How many people died in plane crashes tha same year? 502 according to the International Air Transport Association (IATA). That's the global result too, not just in the U.S. Imagine the difference between the 502 global aircraft deaths and the god-knows-how-many global automobile deaths. I'm sorry, but when someone says they don't want to fly because they don't want to be another statistic, it simply holds no ground at all. Period. I could literally spend days supporting this point with endless amounts of studies and other evidence. How can you not trust that evidence?!?! Perhaps the only reason people still fear flying is because the media concentrates on a plane crash whenever one happens. Yes, it's certainly tragic that people died and it seems more tragic that more died at one time. What I really wish the media would do is cover every single car accident in the U.S. that occurs and report the number of deaths as well. I GUARANTEE that you would never set foot in your car again. If you're willing to accept the risk of sitting in your driver seat every day, then sitting in a plane for a couple of hours should be a walk in the park. Bottom line: trust the numbers, because numbers don't lie.

To conclude, I would like to refer back to my definition of fear: an irrational human response to the unknown. What I want you, the reader fearful of flying, to take away from this is to realize the lack of rational behind your fear and to be completely calm and comfortable in that aircraft 7 miles high. Furthermore, realize that air safety is really a complex network of preventative measures handled by professionals and very intelligent people who live their lives working to make it even better. Lastly, realize that you are in fact hypocritical and irrational if you step into a car without second thoughts but have a breakdown upon boarding an airplane. I know that you may still have many unanswered questions, so please do not hesitate to send me an email at mike_stangy@msn.com.

Also check out my flickr page for new photos! I uploaded a few new videos to my youtube page as well, including one of my friends and I from the University of Michigan flying around: Flying around Michigan. If you have a youtube account, please subscribe! As always, comments on my blog, photos, or videos are always appreciated.