Let’s Talk About the Worst Business in The History of Capitalism
A recent conversation with a friend and the news this week that JetBlue wants to acquire Spirit Airlines got me thinking about the worst business in the history of not only capitalism, but of the known universe:
Airlines.
Yes, airlines. You’re probably thinking “What’s he got against airlines? I know some fine people who are pilots, flight attendants, work in marketing…”
My response: I am sure they are all fine people. They just happen to work in a shit industry.
How so?
Measured by any of its stakeholders (save one, which we’ll get to), the airlines industry in the aggregate has consistently underperformed, screwed, lied to, cheated, stolen from, abused, insulted, and generally crapped on all of them, namely:
- Investors: For the past three or four decades, the airlines have been in a veritable circle jerk of bad business practices, followed by Chapter 11 restructurings, followed by bad business practices, followed by bailouts, followed by bad business, rinse, repeat. You have no doubt forgotten about more airlines that have started and failed than there exist airlines in operation globally today. Need proof? Wikipedia has a list of just the defunct United States-based airlines and it’s so big, it had to be broken up into four sections. Together, these represent billions of lost investor capital.
Fact: All four legacy carriers (American, Delta, United, Hawaiian) had to declare bankruptcy at least once to survive to this day.
-Employees: During this same period (roughly since airline deregulation in the United States started in 1978), employees at airlines have been consistent whipping boys and girls for their corporate overlords. Employee pay has dropped roughly 40% during this time. Often, during one of the recurring Chapter 11 restructurings, the employees agree to pay concessions in exchange for equity stakes that are then wiped out in the next, inevitable restructuring. It’s obscene, shocking, but not surprising.
Of course all during this time, front-line airline employees (mainly the flight attendants, gate agents and customer service reps) are subjected to a daily barrage of excrement from entitled, douchenozzle customers who expect to be treated like royalty for their $129 round trip fare to Orlando and when they don’t get it, they shout, spit, punch or take off their shoes so that the rest of us can see, hear and smell what animals they are. And that does NOT include the Covid/mask-related tantrums that now populate social media feeds.
- Taxpayers: After the 9/11 terrorist attacks, the U.S. taxpayer bailed out the airlines to the tune of $5 billion. But that pales in comparison to the recent Covid bailouts, sponsored by the U.S. government and paid for by… you (and me.) The cost for those: (Sit down if you are standing. Because you’ll want to stand up and run away screaming): $54 billion.
And what does all that taxpayer-provided lucre get us, the customers, who provided the bailout money?
Ah, yes - that gets us to our next stakeholder – the customer. We are totally complicit in the decline and fall of the airline industry because, quite simply, we keep eating the airline industry’s shit sandwiches and coming back for more.
WE are the ones who expect to fly round trip to Zanzibar for $309 and then whine about the food and the legroom.
WE are the ones who refuse to pay a little extra for assigned seats and then disrupt the entire boarding process because our kids are sitting half a plane away from us and OH MY GOD what will happen to Timmy and Tina during the flight if they are not under our constant watchful and loving eye???
WE are the ones who attempt to avoid checked bagged fees by taking our too-big “carry-on” suitcase plus a computer bag, plus a purse, plus a shopping bag plus the booze we bought in the airport plus the straw hat from Zanzibar that we don’t want to get crushed and then attempt to stuff it all in the overhead bin so that we can stretch our feet out under the seat in front of us in an attempt to prevent deep vein thrombosis and a pulmonary embolism.
I could go on, but you know EXACTLY what I am talking about.
But here’s the thing: That plane, and the fuel, and the pilots and their training and the flight attendants and THEIR training and the ground crew and on and on ad nauseum: All that costs money. There’s a reason why a roundtrip ticket, business class, JFK to Los Angeles costs about $2,000. Because THAT is what it costs to fly you, feed you, keep you safe, show you a movie, AND subsidize the rest of us in the back of the plane who paid $350 for the same flight.
And now, JetBlue wants to acquire Spirit airlines. (Sidebar: JetBlue and I have a… complicated… relationship. In 2008, I sued JetBlue in small claims court and won. You can read the long, sordid affair here.)
This JetBlue/Spirit merger oughta be interesting. JetBlue has always marketed itself as an airline that delivers service that is a cut above, for a reasonable price. Spirit Airlines has a different business model that goes something like this:
“Attention Spirit passengers: As you board the plane, you’ll notice that Roland, our guest relations officer for this flight, is standing in the doorway with a metal spike. If you want to fly today WITHOUT Roland jamming that spike into one of your eyes, it will cost you $50.00. You are welcome to NOT pay the $50.00, but Spirit will not compensate you for any eye surgery or brain hemorrhaging that might result from your choice. Thank you for being a Spirit passenger today!”
I don’t know how JetBlue is going to absorb that Spirit spirit into its corporate culture, but I have a feeling that over the long-haul, the lowest common denominator will prevail in the name of (attempted) profits. That means, if the deal goes through, Roland will be standing in the door of a JetBlue flight you will be boarding in the not-too-distant future.
So, who is that one stakeholder in the airline industry that seems to always make out like a bandit, no matter what happens? The airline executives, of course. These slippery fellows (and they are pretty much universally men) always manage to get theirs, no matter how much they screw the pilots, the flight attendants, the ticket agents, the shareholders, taxpayers or the customers. For proof, one need not look any further than the salaries paid to airline CEOs AFTER we taxpayers bailed out their sorry companies during Covid. (The numbers for JetBlue and Spirit are 2021 compensation. The rest are 2020 compensation, as those companies’ 2021 regulatory filings are not in yet.)
American Airlines – W. Doug Parker - $10. 6 million
Delta – Ed Bastien – $13 million
United – J. Scott Kirby – $8.9 million
JetBlue – Robin Hayes - $3.5 million
Spirit – Edward Christie III - $3.9 million
We get it: running an airline is a complicated affair. But, we keep bailing you out, subsidizing your tax loss write offs and paying for an ever-decreasing flying experience/horror show. The least you could all do is throw a million each of salary back into the kitty so we could get a bag of peanuts and a wet-nap before we land.
So, there you have it: The airline industry is right down there in the gutter with loan sharks and bookies. Except that those two are endlessly profitable and make no marketing claims to be anything other than what they are, whereas United is once again exhorting us to “Fly the friendly skies (so we can screw you with your pants on.”)
But I don’t fault the airlines, really. As long as we keep coming back for more, and as long as our Congress keeps bailing out failing companies, nothing – NOTHING – will improve. Now if you’ll excuse me, I have to figure out how to stuff a baritone saxophone under the seat next to me.