IN Daily Opinion/Column

Blame the airline delays on Alfred Kahn

Dec 29, 2010 @ 3:16 pm

By Evan Cooper

Stacked up at Laguardia (Bloomberg News)
+ Zoom
Stacked up at Laguardia (Bloomberg News)

If you or a loved one were stuck on a plane or in a crowded airport in the last week, you can blame it on the blizzard. But you can also blame it on Alfred E. Kahn, the Cornell University professor of economics who died Monday in Ithaca, N.Y., at the age of 93.

Under President Jimmy Carter, Mr. Kahn was head of the Civil Aeronautics Board, which oversaw the nation's airlines, and it was under his guidance in 1978 that the federal government deregulated air travel.

For those of you too young to remember, there was once a time when flying in an airplane was actually enjoyable and civilized.

In exchange for buying a ticket (which generally were so expensive that only business travelers and the relatively wealthy flew), air travelers were plied with food and drink, given magazines to read and playing cards to keep them busy (and take home), their children received little plastic toys, and you didn't have to be 4-foot-6 to be able to stretch out your legs and be comfortable.

How was this possible, you incredulous youths may ask? Well, every aspect of airline travel was regulated. If you were flying from New York to Los Angeles, for example, you could select only from United, American and TWA, and you paid exactly the same price for a ticket regardless of which carrier you chose. Delta couldn't fly the New York-L.A. route, but United couldn't fly from New York to Atlanta, which Delta could.

When there was a delay due to a snowstorm, for instance, you just stayed in a hotel that the airlines would probably pay for, as their profitability was assured by the CAB.

Mr. Kahn destroyed all that. He had the temerity to withdraw the profit assurances, allow airlines to fly where they wanted to fly, charge whatever fare they desired and merge with whomever would have them. Just look what happened.

Fancy-schmancy Pan American World Airways, which was considered the nation's “official” airline despite never being allowed to fly domestic routes, began facing competition from domestic airlines that were now free to fly internationally. Pan Am bought National Airlines despite the carriers' incompatible fleets, struggled with high fuel costs and stubborn unions and went out of business.

Meanwhile, many new airlines emerged — Peopleexpress, New York Air, Kiwi and Midway, to name a few — and eventually folded. But Southwest and JetBlue succeeded and made air travel cheap and easy. Still, is having more and more people flying because prices keep getting lower what we really want?

Nowadays, taking a plane is hardly more glamorous than taking a bus. (Of course, buses were deregulated too, and now there are buses that take you from New York to Boston in a luxury seat for $10 in less time than government-owned Amtrak, which charges $95.)

Today, when a natural “disaster” like a snowstorm hits, it's no wonder that the much larger airline business spawned by Mr. Kahn falls apart. After all, when so many people have come to expect being able to get someplace else quickly and cheaply, and they can't do it, that's terrible.

Mr. Kahn's philosophical legacy is felt in telecommunications and securities, too. And it's time to turn back the clock.

If we just glued together the shattered pieces of AT&T and let one company run landlines and cell phones, I bet we'd never have all those dropped cell phone calls that we suffer today. (Okay, we probably wouldn't have so many cell phones either, but most of them are used by teenagers whose calls are unnecessary anyway.)

And if all brokerage firms charged the same commission and fees, there would be far less of a fuss over disclosure.

It's clear that although well-intentioned, Mr. Kahn wrought havoc on America through deregulation and greater competition. He gave ordinary people freedom and choice, and look what happened.


What do you think?

View comments

Recommended for you

Sponsored financial news

Upcoming Event

Oct 03


Adviser compensation & staffing: Strategies and research to build a top-performing firm

Competition for established talent in the advice industry is at an all-time high — and the industry's top firms are using compensation and staffing strategies that will likely lead to both short- and long-term success.In this... Learn more

Featured video


Inside the first robo ETF

When it comes to exchange-traded funds, innovations come in all shapes and sizes. Check out Robo Global's Bill Studebaker discussing the first robo ETF.

Video Spotlight

Are Your Clients Prepared For Market Downturns?

Sponsored by Prudential

Recommended Video

Path to growth

Latest news & opinion

HighTower faces pressure to let investors cash out

After an IPO planned for last year didn't happen, the company could opt to satisfy its backers with a sale.

Jerry Schlichter's fee lawsuits have left an indelible mark on the 401(k) industry

After a decade of litigation, fees are lower and retirement plans are more transparent. But have the lawsuits gone too far?

10 best financial adviser jokes

How many financial advisers does it take to screw in a lightbulb?

With margins crashing, broker-dealers look to merge: report

Increased regulation is straining profit margins among broker-dealers, sending many of them into the arms of their bigger brethren.

Hackers may have profited from SEC breach

The hack of the agency's Edgar filing system occurred in 2016, but the regulator didn't conclude until last month that the cybercriminals may have used their bounty to make illicit trades.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print