Cheap Airlines

Not Many Cheap Airlines Around Anymore

The question came up before about the effect or the possible effect of the agent pressure on the demise of Braniff, for example, or putting pressure on Pan Am, for example, which has been very visible in cheap airlines. Not very long ago, Frontier Airlines, a regional carrier, very cheap airlines -- there wasn't any question about their viability at all -- made some effort to reduce commission rates.

That effort was aborted very quickly. I believe it was only a matter of weeks; it may have been a little longer than that, but not much. And I think the reason for that was they were losing business. United Airlines tried a bit of a different strategy -- oh, I guess it's a couple of years ago now -- whereby the commission would be based on the sale of the ticket, not on the ticket price, but on the notion that each ticket costs about the same to process, so why should it be based on a percentage of the ticket price?

That aborted fairly quickly, and neither of these airlines were in any financial trouble. I guess I'm convinced that there was some indication that maybe the pressure from the agents had something to do with changing that around. So I believe that bringing increasing competition into the marketplace -- I believe Chairman McKinnon mentioned this -- would at least provide a discipline. If the agent, it seems to me, is providing a good service and at a reasonable price, and an efficient service -- and, by the way, I think in most cases it's fair to say that they do.

For example, I would guess that the average employee at an agency makes a good deal less than his counterpart at an airline. So the agent's performing that in general at a pretty efficient price. But I think it would bring a discipline to the marketplace so the airlines would have an option. On balance, then, I would say my perception certainly would be positive.

What we've really done -- when you have an unknown, a lot of people are frightened of the unknown. They're afraid of what the unknown holds. And in this case all we've done is make it available to have competition in this industry and say, "Hey, if somebody's got a better idea, you're free to develop that idea".