Let Virgin America Fly
By Erick Posted in Economy — Comments (16) / Email this page » / Leave a comment »
The airline dinosaurs like to blame deregulation for their failures. Deregulation saw a lot of the airline dinosaurs die. Some of the legacy carriers have hung on and they are fighting the rise of the star ups like Southwest, JetBlue, and AirTran.
In the past week, I've learned a couple of things that explain a lot about the problems of the airline industry. First, it is against the law to have a privately owned airport in this country. That's right -- every airport must be government owned. All those ways we used to say the USSR was inferior to the US because of state owned enterprises -- well, just look at our airports.
Second, in order to run an airline domestically, 25% of the airline must be owned by Americans. Talk about protection. Let's get this straight -- the legacies, which are dropping like flies and brought us the fun world of ten hours on runways with limited liquor, get a competitive edge against outside innovators.
One of their arguments is that some state run airlines would come in and compete. Well, you know, if I could get Singapore Air's service between Atlanta and Washington, I'd be all for it! Especially if Singapore's taxpayers are subsidizing my flight!
This all comes up because Richard Branson's airline, Virgin, is set to launch an American domestic carrier called Virgin America. But the DOT won't let VA get off the ground because, well, Mr. Branson is British. He doesn't control the company, mind you. He runs a holding company that VA would be indirectly linked. Nonetheless, Delta, Continental, Northwest, and others have all raised hell because of it.
The result? The United States is denied a new innovative carrier. Competition is crushed. What can you do avoid it? Easy. Go here. Check out the airline, sign the petition, and tell Congress competition is a good thing.
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Let Virgin America Fly 16 Comments (0 topical, 16 editorial, 0 hidden) Post a comment »
Don't tell the feds about Racine, Wisconsin's John H. Batten Airport, the largest privately-owned, public-use reliever (FAA-designated) airport in the country. While it does not have a tower or regular scheduled service, it does have a 6,500-foot runway with ILS, a second 4,800-foot runway, and a National Weather Service ASOS station. It also has been designated a port of entry by INS/ICE.
While Richard Branson is a big-time lefty, and the airline would be flying Airbus craft, I agree; Let Them Fly!
See here.
"Everywhere but the U.S. has embraced either a privatization of airports or a public/private relationship where airports are companies set up to provide an airport—and the airlines fly there or not," says Steinert. "Elsewhere, airports are run as businesses and become self-supporting—and can make a profit. It's illegal to have a privatized airport in the U.S."
The whole place is zoned as an airport.
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"Those who expect to reap the blessings of freedom must, like men, undergo the fatigue of supporting it."
-Thomas Paine: The American Crisis, No. 4, 1777
All Virgin America has to do is set up an American ADS/ADR facility and float dedicated shares equivalent to 25% of outstanding shares (or 25% of the voting class of stock) and then this should fulfill the legal hurdle.
chsw
Hooray for name-dropping! Actually, I flew on his charter to the UK for the Live 8 festivities, and he came and sat with us for a bit on the way over. I think he was more interested in our comely Slovakian stewardess, though. A nice enough fellow, politics aside. Not a dour type at all.
Anyway, 100% agreed with this. Virgin America should have the opportunity to fly.
We are but warriors for the working-day.
His friendship with Gore aside, he always struck me as sort of the “rock star of capitalism” in that he’s earned enough money to do whatever he wants and seems to always find something new and interesting to do.
Also, I have an old issue of Action Force (the UK version of GI Joe) where he makes a cameo appearance. So he’s got the coolness factor and the geekness factor going for him.
I'm not a South Park Republican, I'm a King of the Hill libertarian.
The links go to information published by Virgin, and there's not a lot there. But reading between the lines, it looks like they want to emulate JetBlue.
If I ever decide to go into the airline business, I hope someone will shoot me first. It's capital-intensive as heck, there are no competitive differentiators, and the marginal costs are extremely high and difficult to control. There just aren't any silver linings. So what did JBLU do?
First, they got the taxpayers of France and Germany to pick up their capital costs. Did you notice the shiny new Airbus in red livery on the Virgin website? They're probably going to do the same thing. This is an unbelievably powerful bit of leverage against competitors who have to finance their equipment the old-fashioned way.
Notice the plan to hub out of SFO. JBLU's hub is JFK, a delapidated and inconvenient airport. JBLU would have gotten off to a much more powerful start at LaGuardia, but an interesting aspect of national politics comes into play here. Congress controls the assignment of all-important landing slots at America's airports. There's no way an upstart airline could have gotten a lot of slots at LGA because they would have to come out of of USAirways', American's, and Delta's hides.
I don't know much about SFO these days except that they overbuilt the place like crazy back in the Internet days, when it seemed like the whole world was flying there. (I had the thrice-monthly NY-San Francisco round trip timed out to 40 hours flat, including an hour in my own bed to recover from the red eye when I couldn't get a first class seat, which was often.) I wouldn't be surprised if there is spare capacity for the taking at SFO. If so, then Branson is taking a very risky swing, because the capacity is spare for a reason.
I couldn't find out who's behind this venture. Anyone know?
Well, you know, if I could get Singapore Air's service between Atlanta and Washington, I'd be all for it! Especially if Singapore's taxpayers are subsidizing my flight!
I am honestly not sure if I can go along with this. I mean, from a selfish, short-term standpoint it would make sense. But it hardly seems like good free-market practice to allow significant government subsidy of business dealings on American soil. (That it already happens plenty would not be an excuse for extending the practice further.)
The Civil Reserve Air Fleet program (CRAF) is a good example.
See:
http://www.af.mil/factsheets/factsheet.asp?fsID=173
Now one could make a case that the rules should be changed. But for whom - Brits only? Once you open that door, the results are hard to predict.
Incidentally, didn't Jet Blue lay quite an egg this past week with the snowstorms? No other airline shut down for a week.
I was just thinking of mentioning CRAF so I'll second your response instead.
Essentially EVERY large U.S. plane is government funded (it's a really good financial deal) so they are all available for use by the government if needed. Some day when we need to airlift supplies or evacuate huge numbers of people from somewhere on short notice it will all be worth it. Look how long it took to get U.S. citizens out of Lebanon just last year as an example of a situation that were it worse could have been a real nightmare.
Besides, I hate to say it, but I really do feel safer with U.S. pilots flying most of the national routes. I particularly like the fact that they're often ex-military pilots too...
Having done some work for Virgin and greatly admiring Branson as a businessman, I'm in total agreement. But I do have one question: if Branson converts to Islam, or a Saudi billionaire who wants to structure his airline just like this wants to try the same thing, will people still feel so gung-ho?
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