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Did Airline Deregulation Lead to Bankruptcy Filings for Delta, Northwest?
ARLINGTON, Texas, Sept. 14 -- Today two major U.S. airlines, Delta Air Lines and Northwest Airlines, filed for Chapter 11 bankruptcy protection, and the Airline Deregulation Act of 1978 ultimately could be to blame.
While the bankruptcy petitions will generate another ripple in the airline industry, it is expected to have minimal impact on travelers, says Tom Parsons, CEO of Bestfares.com, an Internet site that monitors airfares.
"Protecting its frequent flyer program will be a top priority for Delta and Northwest as their proceedings take place in bankruptcy court," says Parsons. "Because of the airlines' code share agreements with many other major carriers, business and leisure travelers will still have the benefit of their frequent flyer mileage earnings for years to come."
Long before the devastation of Hurricane Katrina and the resulting increase on already soaring fuel costs, the airline industry was in trouble, and Delta and Northwest have been no exceptions. Parsons points to industry deregulation enacted during the Carter Administration.
"Deregulation has given consumers the opportunity to fly the world and still pay a competitive price, but it also may have ultimately led to the downfall of this major legacy airline," says Parsons.
Although deregulation has led to lower fares for consumers and an increase in passenger loads for the airlines, these benefits have not been evenly distributed throughout the United States. Costs have fallen more on heavily trafficked, longer-distance routes than on shorter ones. Deregulation has led to heavy financial losses for carriers, conflicts with labor unions and initiated costly pension plans at a number of airlines. Since deregulation in 1978, dozens of air carriers (including Eastern, National, Vanguard, Frontier, Western Pacific, People's Express, Midway, Braniff, Pan Am, Continental, America West Airlines and TWA) have gone bankrupt or been liquidated, and the industry has seen many mergers and acquisitions among the survivors.
"Bankruptcy talks also could bring about a new wave of airline mergers as a means of survival in the market," says Parsons. "Today we could see America West and US Airways piecing together their operations. Is it possible that we could see Northwest and Delta considering a merger?" asks Parsons.
Bestfares.com's Tom Parsons, one of the most sought-after travel industry experts in the United States, has been chasing down hidden travel bargains and bringing them to the traveling public for 20 years. Parsons regularly appears on Fox News Channel, NBC's Today Show, ABC's Good Morning America, CBS's The Early Show, CNN and MSNBC.
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