In this age of delayed flights, rising fares, and generally poor service, even some longtime proponents of deregulation are beginning to reconsider their position.
In this age of delayed flights, rising fares, confusing price structures, congested airports, mounting fees, and generally poor service, more and more travelers are beginning to reconsider their position on regulation of the airline industry.
In many cases, it's a bit of a "Catch 22" for the airlines. No one can legitimately argue that fuel costs have not had an adverse effect on airline costs and resulting airfares. Airlines have low fixed costs and high variable costs, with much of the latter consisting of fuel expenses. For example, with jet fuel at $3.17 per gallon, the fuel cost per hour for a DC-10 in flight would be $7,624 and for a 747, $10,813.
Obviously, these costs must be recouped through fares, but this is not the major complaint of most of today's passengers, particularly business travelers. The concern is the product being received for the price paid. First of all, the fares are both high and erratic, varying with Saturday stay-overs, lead time, and other considerations. It is not uncommon to have a variety of fares represented on a given flight among passengers with similar itineraries.
Second, the fees are a major irritation to many fliers. In 2010, airline revenues from bag fees totaled $3.4 billion. The baggage charges have resulted in more carry-ons with no space left for the last passengers to board the aircraft. Oh, by the way, don't forget to pay the fee for the extra leg room if you want some semblance of comfort.
Obviously, poor service, such as flight delays, is not always the fault of the airlines, but when it is, it just compounds an already unpleasant experience.
Mergers have created further unpleasantness and expense in some cities. My hometown of Memphis is a case in point. Since Delta's acquisition of Northwest in 2008, flights out of Memphis have been reduced by 33 percent. Memphis's recent average airfare was third highest among the country's 100 airports and 31 percent higher than the national average. The point was brought home to me when I paid $1,093 roundtrip to go to a meeting in Chicago. This was with two weeks' notice and no Saturday stay-over. I would have been better off if the meeting had been in Paris. One of our local wags has started a Facebook page titled "Delta Does Memphis," and it already has 1,500 members. Delta cites high fuel costs, but it appears to be more like the time-honored practice of charging whatever the market will bear.
Is re-regulation the answer? Many think so. As a longtime proponent of deregulation, I am on the fence on this one.
The Airline Deregulation Act was signed into law on Oct. 24, 1978. Prior to that time, the Civil Aeronautics Board set fares, routes, and schedules for the airlines, and the 1978 act removed that power. The stated goals of the new legislation included "the avoidance of unreasonable industry concentration [that] would tend to allow one or more air carriers to unreasonably increase prices, reduce prices, or exclude competition" and "the encouragement of entry into air transportation markets by new air carriers, the encouragement of entry into additional markets by existing air carriers, and the continuing strengthening of small air carriers."
For several years, it seemed to work. Fares did go down, and new airlines entered the market. Frequent flier programs were introduced—a wonderful perk for the business traveler.
The trend seems to have reversed itself, however. The stated goals of the 1978 act are no longer being achieved. It is even difficult to redeem earned miles on some airlines. I believe it is time for the airline regulation question to be revisited. While I hope that re-regulation is not the only answer to the problem, it is one that must be seriously considered.
The number of container ships waiting outside U.S. East and Gulf Coast ports has swelled from just three vessels on Sunday to 54 on Thursday as a dockworker strike has swiftly halted bustling container traffic at some of the nation’s business facilities, according to analysis by Everstream Analytics.
As of Thursday morning, the two ports with the biggest traffic jams are Savannah (15 ships) and New York (14), followed by single-digit numbers at Mobile, Charleston, Houston, Philadelphia, Norfolk, Baltimore, and Miami, Everstream said.
The impact of that clogged flow of goods will depend on how long the strike lasts, analysts with Moody’s said. The firm’s Moody’s Analytics division estimates the strike will cause a daily hit to the U.S. economy of at least $500 million in the coming days. But that impact will jump to $2 billion per day if the strike persists for several weeks.
The immediate cost of the strike can be seen in rising surcharges and rerouting delays, which can be absorbed by most enterprise-scale companies but hit small and medium-sized businesses particularly hard, a report from Container xChange says.
“The timing of this strike is especially challenging as we are in our traditional peak season. While many pulled forward shipments earlier this year to mitigate risks, stockpiled inventories will only cushion businesses for so long. If the strike continues for an extended period, we could see significant strain on container availability and shipping schedules,” Christian Roeloffs, cofounder and CEO of Container xChange, said in a release.
“For small and medium-sized container traders, this could result in skyrocketing logistics costs and delays, making it harder to secure containers. The longer the disruption lasts, the more difficult it will be for these businesses to keep pace with market demands,” Roeloffs said.
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
As the hours tick down toward a “seemingly imminent” strike by East Coast and Gulf Coast dockworkers, experts are warning that the impacts of that move would mushroom well-beyond the actual strike locations, causing prevalent shipping delays, container ship congestion, port congestion on West coast ports, and stranded freight.
However, a strike now seems “nearly unavoidable,” as no bargaining sessions are scheduled prior to the September 30 contract expiration between the International Longshoremen’s Association (ILA) and the U.S. Maritime Alliance (USMX) in their negotiations over wages and automation, according to the transportation law firm Scopelitis, Garvin, Light, Hanson & Feary.
The facilities affected would include some 45,000 port workers at 36 locations, including high-volume U.S. ports from Boston, New York / New Jersey, and Norfolk, to Savannah and Charleston, and down to New Orleans and Houston. With such widespread geography, a strike would likely lead to congestion from diverted traffic, as well as knock-on effects include the potential risk of increased freight rates and costly charges such as demurrage, detention, per diem, and dwell time fees on containers that may be slowed due to the congestion, according to an analysis by another transportation and logistics sector law firm, Benesch.
The weight of those combined blows means that many companies are already planning ways to minimize damage and recover quickly from the event. According to Scopelitis’ advice, mitigation measures could include: preparing for congestion on West coast ports, taking advantage of intermodal ground transportation where possible, looking for alternatives including air transport when necessary for urgent delivery, delaying shipping from East and Gulf coast ports until after the strike, and budgeting for increased freight and container fees.
Additional advice on softening the blow of a potential coastwide strike came from John Donigian, senior director of supply chain strategy at Moody’s. In a statement, he named six supply chain strategies for companies to consider: expedite certain shipments, reallocate existing inventory strategically, lock in alternative capacity with trucking and rail providers , communicate transparently with stakeholders to set realistic expectations for delivery timelines, shift sourcing to regional suppliers if possible, and utilize drop shipping to maintain sales.