Art Buchwald
1994 Los Angeles Times Syndicate
Vanishing Into Thin Air
When the history of the airlines business is written, a page will have to be set aside for Conrad Rader, who developed the Bottom Line economic theory, which spelled out how an airline could never make a profit.
Rader teaches “Red-inkonomics” at Wonka U. and is a leading candidate for a Nobel Prize. I found him in front of his blackboard drawing perfect zeros with a piece of chalk.
“They say that you were the first scientist to discover how the airlines could lose money without even trying,” I said. “You can say that again. Before the Rader hypothesis, some airlines showed profits. Now they’re all bleeding red ink.” ‘How did they do it?” “It was a case of bad management plus luck. I made a study for USAir and I discovered that before deregulation, a majority of the airlines were making a reasonable living and still flying people where they wanted to go. They took the money they had made and ordered new planes with it and the rest they distributed in profits. My job was to discover what they were doing wrong.”
“How did you do that?” “I found out that the reason for the profits was that the airlines never engaged in a price war. Therefore I advised them to slash their fares until they went into Chapter 11.” “The price war should have guaranteed a loss.” “It worked far better than I had planned. Not only did the airlines slash fares, they started giving away seats for nothing. I can’t take all the credit for how bad it became. The ones who must do that are the CEOs.” “Wasn’t the cut in fares a good move to get new customers?”
“It seemed so at first. But then the law of the jungle took over, and the airlines started to cannibalize each other. Once the competitor was bleeding the survivor could charge anything it wanted to.” “Why didn’t the airlines make money once they chopped off their competitors’ heads?” “Because of their frequent mileage plans. They gave away so many seats that there were none left for paying passengers.”
“Was that your idea?” “It was one of them. Frequent flier programs are the mother’s milk of Chapter 11.” “Everyone flies and nobody pays, I said. “It wouldn’t have worked if the airline executives hadn’t seen the writing on the wall and voted themselves golden parachutes when the companies were going under. Knowing that there was always money waiting for the bosses made it easier to screw up the industry.”
“Are those the clients you worked for?” “When they had a profit problem, they came to me.” “What about the need for new airplanes?” “An airline can always use new airplanes, but they’re much happier putting their money into advertising their cut rate fares.”
ARE YOU CURRENT WITH THE EUROPEAN AVIATION SAFETY AGENCY REGULATION and REQUIREMENTS?
Significant changes within the European Aviation Regulatory (EASA) framework have been brought about by the introduction of new European Aviation Regulations.
IN THE USA FAR - 145 + EASA SC = EASA part -145
IN EUROPE EASA part -145 + FAA SC = FAR -145
CREATION OF AN AVIATION PROGRAM FOR OIL SPILL DISPERSION - Read more...............
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