The National Corridors Initiative, Inc.
James P. RePass - President & CEO
The Hon. John Robert Smith - Chairman
MA Office: 59 Gates Street, Boston, MA. 02127
Fax (CT): 860-536-5482
January 28-29, 2008
St. Louis, Mo
The First Carmichael Conference
Position Paper To the Candidates for President
Text of Major Address by Robert Crandall,
former Chairman and CEO of American Airlines
To the Carmichael Conference, St. Louis
Vol. 9 No. 5 - February 4, 2008
See This Link For The Original Article And Photos
Thanks to you all for being here today.
I am delighted to be part of an effort to attract political attention to the gathering crisis in American transportation, and to have had an opportunity to hear others confirm the concerns I have long had about the atrophication of our rail system and the deterioration of our highway system. Its late in the game, and we are far past the time when our national leaders should have laid out, debated and implemented an integrated, carefully thought out and effective national plan for developing and deploying an optimized national transportation system.
Unhappily, we live in a time as Joe Klein observed in his recent and excellent book politics lost in which the very notion of planning, especially planning for the common good, seems vaguely socialist. that reality underscores the fact that we must do more than merely describe problems and recommend solutions -- we must also persuade our political leaders that those problems deserve the attention of our government. We must either persuade lots of folks who dont want government in the game to change their minds or, alternatively, change the leadership in favor of those who will pay attention!! And that, of course, is what politics is all about.
We have had the good fortune during the last couple of days to hear from a number of people well qualified to comment on, and offer solutions to, our rail and highway problems. As you all know, my background is in the aviation sector so let me spend a few minutes talking about what has gone wrong with our aviation system, why I think it is important for us to fix it, and what I think should be done. Then we can come back to the importance of working to develop an integrated approach designed to optimize the contribution all our transportation capabilities.
In my view, the deterioration in our aviation system has its roots in the badly conceived airline deregulation act of 1978. Myself and many others were fiercely opposed to the bill, and did all we could to defeat it.
While I was opposed to the deregulation bill we got, it was absolutely clear that some modifications to the regulatory scheme then in effect were need. Moreover, it is clear that deregulation has had some favorable effects.
Absent deregulation, the industry would likely have moved much more slowly towards optimization of the hub and spoke methodology which has worked so well to connect the many dots that make up America, would have taken far longer than it did to develop the automated reservations and operational systems now used throughout the industry, would have been far slower to create fare and load factor management tools like yield management and almost certainly wouldnt ever have launched the frequent flyer plans which are so ubiquitous today. The competitive juices that opened the way for these and other innovations were sorely lacking in the airline industry of 1970s, and it is clear that deregulation was a great stimulant.
Indeed, absent deregulation, it is very doubtful that American Airlines my alma mater would be anything like the size it is today. Because we grasped the nettle more quickly than our competitors, we gained a first mover advantage in many areas and were able to translate that leadership into a dramatic growth and profitability advantage throughout the 1980 and early 1990s.
Unhappily, all that good news is belied by the sad state of affairs of our present air transportation system, which isnt much of an endorsement for the presumed virtues of unrestricted competition. While the industrys decrepit state cant be blamed entirely on deregulation, the devil has proven to be in the details. The economists and academics who fathered the idea and whose forecasts of probable industry responses were wildly off the mark -- cannot have imagined that their successors in government would be neither as indifferent to the need for fine tuning, nor as abjectly inept as they have proven to be.
Thus, while most who opposed deregulation would acknowledge that competitive freedom has brought many benefits to an industry that certainly needed changing, I am sure many would share with me some sense of vindication from the headlines and stories so frequent in todays press.
Consider these few examples:
The industrys impact on our collective well-being is profound. Numerous studies have shown that aviation accounts for more than a trillion dollars 10% plus of our GDP and drives about 11 million jobs. Taken together with the economic implications of inadequate rail and highway structures, these numbers imply ever-deepening troubles ahead.
Think back, if you will, to the second presidential debate of the last campaign. A woman in the audience inquired of the candidates how America could sustain its standard of living if more and more good jobs are flowing to places where wages are low. Neither candidate, in my view, gave much of an answer.
But there is a good answer, which is that all jobs do not flow to those places where wages are low. Instead, jobs flow to those places where the total costs of production and distribution are lowest. Thus a country like America where wages are not as low as in many other places needs to be good at all the things that contribute to production and distribution leadership. Among those things are efficient capital markets, outstanding educational institutions, a strong information technology and telecommunications sector, and efficient transportation systems able to move materials, people, and finished goods quickly and cheaply from place to place.
These activities have catalytic impacts on many other businesses, and are thus key drivers of superior economies. In the U.S., each of these things has made a big difference.
In all these areas, our government ought to be doing everything possible to sustain Americas advantages --to be sure that higher education, information technology, telecommunications and transportation remain areas of U.S. leadership -- because continued leadership in these areas is the only way we can hope to sustain our present standard of living.
While leadership in some areas requires only policy leadership from government, with the private sector carrying the burden of execution, transportation is different. In transportation we depend on government for both sound policy and active participation since there are some things that only government can provide.
Safety regulation is one such activity, and in this area, at least as it relates to aviation, the public and private sectors have worked quite effectively together. Everyone involved in aviation safety the FAA, the airlines, and the front line folks who make it happen every day can be rightfully proud of the extraordinary job they have done in making commercial flight ever safer.
Unhappily, despite Herculean self-help efforts by the industry including the bankruptcy of almost every legacy airline not much else has gone well. Given the reality that things could and probably will be even worse unless we do something different, I think its about time for government to come to grips with our pressing need for new aviation policies. During the course of the last couple of decades, there have been numberless conferences, commissions, conclaves, papers and speeches but damn little action.
In my view, its pretty clear what we need to do:
As I suspect all of you know, landings and takeoffs at Laguardia airport are limited and airspace in and around New York is very crowded. Nonetheless, a substantial number of flights still leave Laguardia bound for Washington d. C. And Boston, both places to which railroad track already runs. If I were the King of Spain that is, if I could do whatever I wanted to do Id prohibit flights to either Boston or Washington from Laguardia while simultaneously upgrading the rail system tracks, equipment, power and whatever else is needed to assure maximum running speed and minimum elapsed time. By doing so, we would better use the railroad asset and would free airplanes, airspace and airport facilities for flights to places that cannot be conveniently reached by rail. Once that was accomplished, Id move in the same direction in and around Chicago, thus relieving the pressure on OHare and on the west coast, thus relieving pressure at Los Angeles and San Francisco.
While were on the subject, I should also mention that I am mystified as to why most European cities can operate high speed trains from their airports to their city centers while we cant, and equally mystified as to why the Europeans are so much better at linking airports and local rail systems than we are.
In a cynical age, it is widely thought naïve to suppose that past practices can be radically changed --- and specifically, that anyone will be willing to think through and then implement the important policy changes needed to fix not just the aviation system, but the transportation system as a whole. Unless someone does, however, things will only get worse in the years ahead --- and the publics growing dissatisfaction may well be a ray of hope.
As load factors and fares rise, terminal congestion worsens, flight delays proliferate, available seats grow scarce and frequent flyers seats become more and more unavailable, there is more and more gnashing of teeth, and our politicians unwilling to provide leadership but always fearful of the publics wrath have at least begun to propose stop gap measures, however ill conceived. A few weeks ago, even our famously laissez-faire administration got into the act by opening underutilized military air space off the east coast for commercial use during the thanksgiving traffic peak.
But stop-gap measures wont solve the long term problem -- which wont go away until the U.S. Department of transportation with the help and support of the congress steps up to its responsibilities and creates a comprehensive transportation master plan that integrates solutions for both passenger and freight traffic with optimized use of all our aviation, rail and highway assets.
The thought and effort that has gone into this conference may well make a difference but no conference or commission will have much real impact until we succeed in persuading the public, and the countrys political leadership, that America cannot sustain its living standards or remain a great power without a first rate, world class transportation infrastructure.
None of whats needed is rocket science. We know how to do what is required --- all thats needed is the will and determination to recapture the excellence that was once the hallmark of all things American.
America deserves better and we should be leading the way towards getting it
Thank you very much.