THIS IS PART ONE OF A TWO-PART SERIES.
The Christmas holiday season is supposed to be a happy time for family and friends to gather together, many of whom travel a great distance to do so. But this past December, the holidays were straight-up ruined for a great number of Americans because the airline industry—Southwest Airlines being easily the worst offender—failed to uphold their end of a relatively straightforward contractual arrangement. We pay for a seat on a plane to take us somewhere at a particular time (and make sure it’s a specific seat, or you might be bumped), and the airline takes care of the rest. Not this time.
The details are important, but if we take the big-picture view from 30,000 feet (sorry, couldn’t resist), this debacle flowed from a policy of deregulation and opposition to robustly funding government agencies tasked with ensuring corporations do what they are supposed to do—and holding them accountable when they don’t. Some members of both parties were, ahem, on board, but Republicans, starting with Reagan, pushed deregulation much harder, and did so across every industry in a rigid, ideological manner. The consequences for the American people are no joke.
RELATED STORY: Southwest's continued scheduling woes were predictable, preventable, and precipitated by greed
Given the number of serious incidents in just the past few months, let’s focus on the transportation industry, starting with the aforementioned air travel sector. (We’ve seen deregulation cause real harm in, for example, health care and the energy industry as well.) As bad as the Christmas Southwest fiasco was, anyone who tried to travel around last Juneteenth can tell you that it was not the first time in 2022 that the airlines messed up badly. Just between midnight and 5 PM on Monday, June 20, FlightAware data showed over 3,000 flights that had at least one leg in the U.S. delayed, with approximately 370 canceled. "This has been another travel Armageddon weekend," James Ferrara, who runs the travel agency InteleTravel, stated to USA Today. "But it's not isolated, or really a surprise."
But that was just a warm-up for what happened six months later.
Although many airlines performed even worse during the week surrounding Christmas than they had in June, Southwest was by far the champion—and not the kind Freddie Mercury sang about. Approximately 17,000 Southwest flights simply disappeared off the board in the seven days ending with Dec. 29, stranding somewhere around 2 million human beings. As the above graphic shows, over the second half of the week a lot more flights were canceled than took off. (It’s supposed to be the other way around.)
RELATED STORY: Southwest Airlines is melting down, cancelling thousands of flights days after the storm ended
In the summer of 2021 Southwest also had a bad run, with their customers experiencing more delays and more canceled flights than those of any of the other three largest airlines. Yet that wasn’t enough to convince them to take the steps necessary to prevent future problems. And no, in case you’re wondering, the December 2022 debacle cannot be simply explained by the winter weather. The issue was badly “outdated” scheduling systems that couldn’t handle a crisis. What’s more, executives at Southwest knew, because not only outside experts but also their own employees were telling them.
“We’ve been having these issues for the past 20 months,” [Captain Casey Murray, president of the Southwest Airlines Pilots Association] told CNN. “We’ve seen these sorts of meltdowns occur on a much more regular basis and it really just has to do with outdated processes and outdated IT.”
Murray noted that Southwest’s ancient scheduling system hasn’t changed much since the 1990s. Chief Operating Officer Andrew Watterson told employees this week that the outdated scheduling system was the main culprit for the outage.
“Part of what we’re suffering is a lack of tools,” Southwest CEO Bob Jordan told employees in a memo obtained by CNN. “We’ve talked an awful lot about modernizing the operation, and the need to do that.”
White House Press Secretary Karine Jean-Pierre declared that the Department of Transportation would demand that Southwest compensate customers whose travel was negatively impacted by the airline’s failure to keep to its schedule. "Southwest Airlines failed its customers—point blank," said Jean-Pierre, adding the Transportation Department "will seek fines from Southwest if it doesn't cover [required costs]. Our administration is going to continue to press for long-term solutions."
Southwest says they know they “messed up” and are working on fixing the problems. Either way it’s going to require our government to hold their feet to the fire, something President Joe Biden has said he will do.
Other airlines have also acted despicably by scheduling flights—and taking payments from customers—that they knew full well had no chance of ever leaving the runway. The Department of Transportation is investigating three of them for doing exactly that, although a spokesperson would not say which ones. May I remind you that our government provided this self-same airline industry with a $54 billion COVID bailout? This is how they pay us back.
It’s not just the airlines, lamentably, that have grounded flights. One of the tasks of the Federal Aviation Administration (FAA) is to notify pilots about potential safety-related matters. Only a matter of days into 2023, the FAA’s notification system made like Kareem Abdul-Jabbar’s character in Airplane (you had to know I was going to work in a reference) and just collapsed.
Critics have raised questions about the response from the Biden administration and Transportation Secretary Pete Buttigieg in particular to these crises. However, many of the problems that crippled Southwest and other airlines resulted from far too weak regulations on their businesses. Likewise, the FAA’s January snafu was the inevitable outcome of years of underfunding. Republicans (as we’ve seen with the House proposal to defund the IRS), always want to reduce money for regulatory agencies. This has hampered Buttigieg’s efforts from the get-go.
Sara Nelson, the president of the Association of Flight Attendants-CWA, said Mr. Buttigieg inherited a department that had been significantly underfunded and came with a host of problems. She said that to his credit, he had been in constant communication with aviation leaders and had been front and center to address problems when they came up.
“People can see that he’s engaging on every issue and taking ownership of that,” Ms. Nelson said, “but that also opens him up for criticism, because there’s not a day that goes by that somebody is not finding fault with the airline industry.”
There is a long history behind the deregulation and underregulation of the airline industry. William J. McGee, a senior fellow for aviation at the American Economic Liberties Project, laid it out in a New York Times op-ed:
The airlines were initially regulated in the 1930s for many reasons, some of which should be familiar to us in 2023: The industry was unable to maintain stable profits, and Americans had grown frustrated with air travel. In 1978, the United States passed the Airline Deregulation Act, phasing out the Civil Aeronautics Board. The C.A.B., while hardly perfect, governed the airlines to ensure that a nationwide air network was maintained, ensured that airlines were earning reasonable profits and able to make necessary capital investments, and set cost-based fares and rules for fair competition.
Under the C.A.B., airline bankruptcies and mergers were rare, flight cancellations and disruptions were rare, airlines never needed nor requested federal bailouts, and the United States maintained a near-universal air transportation network that covered rural and lower-population regions with lower, cost-based airfares. (Nowadays, airfares in rural and smaller markets are the highest in the country.) With none of these things any longer true, and as we endure a never-ending chain of crises, it is clear that the deregulation experiment since 1978 needs to be rethought.
Since the late 1970s, this country has not seen its industries as in need of governance, and so has allowed them to flounder and flail. We have neglected to adequately fund or respect our administrative agencies. The airline industry and air transportation system are ground zero for this disastrous governing philosophy.
McGee went into the nitty-gritty about the things airlines and the FAA need to be doing differently—technological and systematic fixes that could have avoided or at least mitigated the problems described here, along with too many others over the years to mention. He noted that other wealthy countries don’t have the same issues, and that’s because they have much stronger regulations and better-funded government agencies in the transportation sector (and that’s not the only industry where such a discrepancy exists). The airline industry lobby has gotten what it wanted, a very light regulatory touch, and customers meanwhile have gotten the shaft. As McGee highlighted, in quite the understatement: “we need to rethink how we do air travel in the United States.”
There are so many other areas of our economy that cry out for stronger regulation. How about some rules to stop consumers from being ripped off—such as the “no junk fee” legislation Biden cited in his State of the Union address. As the president powerfully stated: “Junk fees may not matter to the very wealthy, but they matter to most other folks in homes like the one I grew up in, like many of you did.” As he also pointed out, Americans are “tired of being played for suckers.”
RELATED STORY: Junk fees are an issue everyone loves to hate—a home run for Biden
Or how about banking, where three U.S. banks suddenly shut their doors over five days in early March? And not little banks, either—we saw the second- and third-largest bank failures in American history. As Daily Kos’ Laura Clawson laid out, the Trumpists are flat-out lying—S.O.P for the GOP—about the reasons for the collapse. Rather than admit that the 2018 Economic Growth, Regulatory Relief and Consumer Protection Act, passed by a Republican House, including a yes vote from then-Rep. Ron DeSantis, and Senate (albeit with a relatively small number of Democratic votes in favor as well) weakened regulations in a way that made exactly these kinds of bank failures more likely, they’re instead screaming about woke banks (former Goldman Sachs CEO Lloyd Blankfein characterized their claim about Silicon Valley Bank as “laughable”) in order to distract from the facts.
Reality is rarely kind to Republicans.
RELATED STORY: 'Woke' is the Republican answer to everything, including a bank failure
In a New York Times op-ed piece, Sen. Elizabeth Warren provided a refreshing dose of that reality along with the receipts: “No one should be mistaken about what unfolded over the past few days in the U.S. banking system: These recent bank failures are the direct result of leaders in Washington weakening the financial rules.” Warren took no satisfaction in pointing out that of the three banks that collapsed, Signature and Silicon Valley Bank (SVB)—the latter of which, as she noted, had grown to the point where only 15 banks in the whole country were bigger—had enough assets to be considered “systematically important” under the Dodd-Frank financial reform bill passed by Democrats (on an essentially party line vote) during the Obama-Biden administration.
However, the Trump law raised the asset threshold from $50 billion to $250 billion, so, er, oopsie? Such banks were required to hold more capital and be more liquid in case—to utilize banking industry jargon—the shit hits the fan. And that’s exactly what happened to Signature and SVB.
In arguing against Trump’s anti-regulation bill, Warren at the time had warned “Washington is about to make it easier for the banks to run up risk, make it easier to put our constituents at risk, make it easier to put American families in danger, just so the C.E.O.s of these banks can get a new corporate jet and add another floor to their new corporate headquarters.” On the other hand, only a month ago, everyone’s favorite non-white supremacist Republican, Sen. Tim Scott of South Carolina, made the opposite argument: “There can be negative impacts for consumers by increasing capital requirements and requiring banks to sequester funds they could otherwise use to provide financial services offerings.” Liz: 1, Tim: 0.
Does it shock anyone that a few years ago, SVB’s CEO Greg Becker strongly urged Congress to relax the Dodd-Frank regulations, and specifically noted the “low risk profile of our activities and business model”? He added that “complying with enhanced prudential standards and other requirements” would cost too much money. Words fail. His did so spectacularly. By the way, if you weren’t angry enough, here’s the topper: SVB gave out annual bonuses—let me try that again—motherfucking bonuses—of up to $140,000 to managing directors a matter of hours before the federal government had to take over the bank.
SVB had made a ton of money the last three years with risky bets that blew up when interest rates kept rising—something nobody could have seen coming. That level of incompetence evokes good ole’ Dubya and heckuva job, Brownie.
Along with Warren, Sen. Bernie Sanders and Biden blasted the Trump deregulation of banks and called for reform, and Warren rightly demanded clawbacks of huge paydays received by the CEOs as well as large bonuses paid out to other top executives at these failed banks. Biden has joined that call as well. Biden called on Congress and regulators to do everything they can to strengthen regulations again “to make it less likely this kind of bank failure would happen again and to protect American jobs and small businesses.” He also stated that while depositors would be made whole, “investors in the banks will not be protected. They knowingly took a risk and when the risk didn’t pay off, the investors lose their money. That’s how capitalism works.”
When it comes to capitalism, there’s one rule above all others. Whether we’re talking about banks, airlines, hotels, the concert ticket industry, or too many corporations period, their first instinct is always this: Profits before people. The only thing that can stop them from acting on that instinct is fear of punishment. The other word for that is regulation.
Ian Reifowitz is the author of The Tribalization of Politics: How Rush Limbaugh's Race-Baiting Rhetoric on the Obama Presidency Paved the Way for Trump (Foreword by Markos Moulitsas)