Posted: March 18th, 2023

Future of commuter airlines under deregulation

Northwest Airlines

Many airlines have faced difficult times after deregulation, and the problems were exacerbated by the downturn in air travel after 9-11. Smaller airlines like Northwest Airlines have had even more problems, and yet Northwest in particular persists and so far has voided going out of business in spite of a series of threats, including poor traveler performance, lowered expectations in business terms, labor problems, and so on.

Before deregulation in the 1970s, many had speculated as to how it would affect the structure of the airline industry, and the prevailing view was that deregulation would lead to a substantial consolidation of the industry, leaving some four to six large systems, each centered around one of the major prederegulation trunks. It was believed, for example, that American Airlines, Delta Airlines, Northwest Airlines, United Airlines, and TWA would be among the survivors because of financial strength or protected international franchises. It was felt that new and larger dominant firms in the industry would be organized around these survivors. Mergers and consolidations were expected to be a major factor, and some did indeed occur (Meyer and Oster, 1981 p. 39).

A report was issued by the Brookings Institution within a few years to see what had happened. The Report also raised the question of the future of commuter airlines under deregulation. Opponents of deregulation had argued that it would lead to severe losses in service to small communities and to a reduction in airline workers’ wages. However, the Report found that this had not occurred (Morrison and Winston, 1986, p. 2). Before deregulation, many had speculated as to how it would affect the structure of the airline industry, and the prevailing view was that deregulation would lead to a substantial consolidation of the industry, leaving some four to six large systems, each centered around one of the major prederegulation trunks. It was believed, for example, that American Airlines, Delta Airlines, Northwest Airlines, United Airlines, and TWA would be among the survivors because of financial strength or protected international franchises. It was felt that new and larger dominant firms in the industry would be organized around these survivors. Mergers and consolidations were expected to be a major factor, and some did indeed occur. Four years after deregulation, the trunk airlines were not only not dominant as a group, but they had lost 11 points of market share to other types of airlines (5.1 to former intrastate and new entrant jets, 1.0 to commuter airlines, and 4.9 to the local service carriers) (Meyer and Oster, 1981, p. 39). Over the next few years, as the smaller and more marginal operations disintegrated, American, United, Delta, and Northwest Airlines moved to buy up the best parts of the smaller companies and their routes, thus consolidating the industry further (Castro, 1991, p. 49).

More recently, the fortunes of Northwest Airlines have declined: “In September 2005, in an industry plagued by debt and rising oil prices, Northwest filed for Chapter 11 bankruptcy protection, reporting debts of some $17 billion. The company vowed to continue operations while it restructured” (Northwest Airlines Corporation, 2006, para. 1). Among the reasons given for this problem were a deepening economic recession, an increase in oil prices, and a strike by Northwest mechanics. The airline had tried to forestall such an eventuality by cutting $1 billion in labor costs, demanding some $35 million in pay, benefit, and job cuts from its nonunion workers. The airline then asked the labor unions for more concessions.

In 2004, Northwest had angered the travel industry by trying to offset $180 million in booking fees by levying a $7.50 fee per round-trip ticket and a $3.25 fee per one-way ticket. Travel agents called this the equivalent of a fare hike and threatened to sop booking Northwest flights. A booking group brought suit, and while Northwest brought a countersuit, the airline also rescinded the fees. The airline made another attempt to raise fares in 2005, but this was overturned when competing airlines would not match Northwest’s prices:

Chairman Gary Wilson responded to Northwest’s troubles by dumping 59% of his shares in the company, valued at $15.1 million, causing stock price to dive 12% amid rumors of impending bankruptcy. Desperate for cost savings and effectively unable to increase rates, the airline instituted a $50 per person fee (capped at $200 per family) for employees and eligible family members who wished to participate in the airline’s longstanding employee benefit, “pass travel,” free travel in empty seats available at flight time (Northwest Airlines Corporation, 2006, para. 35).

The most recent financials for the company are as follows:

Fiscal Year-End

December 2005 Sales (mil.)

1-Year Sales Growth

2005 Net Income (mil.)

2005 Employees

1-Year Employee Growth (Northwest Airlines Corporation, Hoovers Online, 2006).

On November 30, 2006, Northwest Airlines Corporation filed its monthly operating statement for the period from October 1, 2006 through October 31, 2006 with the United States Bankruptcy Court for the Southern District of New York, and one report states,

The Company believes that the material risks and uncertainties that could affect the outlook of an airline operating under Chapter 11 and in a global economy include, among others, the ability of the Company to continue as a going concern, the ability of the Company to obtain and maintain any necessary financing for operations and other purposes, the ability of the Company to maintain adequate liquidity, the ability of the Company to absorb escalating fuel costs… (Form 8-K for Northwest Airlines Corp, 2006, para. 2).

A number of other potential hazards are listed and detailing the problems faced by the airline at the present time.

Moylan (2005) believes that Northwest can weather its bankruptcy filing and notes that Continental and America West managed to do so, though TWA, Pan Am, Eastern, and Braniff did not. Bankruptcy is likely to give Northwest relief on its pension and labor costs. Northwest says it wanted to solve its labor cost and pension without declaring bankruptcy but was unable to do so. Bankruptcy is a last resort because it can create ill will and place the company in more jeopardy, and also because it is expensive and further means a loss of management control. Under Chapter 11, the company’s decisions are influenced by a committee of creditors who have as their primary interest recovering what is owed to them, not the ongoing health of the business. Bankruptcy freezes all prebankruptcy debts and interest payments, and the company has to pay all current expenses with current revenue. The hope is that the airline will be able to lower expenses, allowing it to cut fares, build market share, and attract passengers fro other airlines. Repairing the situation will take time and cannot be rushed. One element that could still hurt the company is bad relations with employees, but the company also has a number of strengths, including a strong hold on heartland markets and valuable Pacific operations. If any other company had to step forward and replace Northwest operations, the task would be daunting.

The situation facing Northwest is not that different than what other airlines are facing after deregulation and after the business problems brought about by the 9-11 attacks, the time spent not fling, and the expenses involved in new security regulations. Airlines are all facing difficult times and trying to bring customers back, and the airlines were facing problems even before that problem occurred. Northwest should be able to survive bankruptcy, but it will still face the task of building a stronger service for the future.

References

Castro, Janice, ‘Get ‘Em While They Last,” Time (July 22, 1991), p. 49.

Form 8-K for Northwest Airlines Corp. (2006). Yahoo Finance. Retrieved December 10, 2006 at http://biz.yahoo.com/e/061130/nwacq.pk8-k.html.

Meyer, John R., Clinton V. Oster, Jr., Ivor P. Morgan, Benjamin A. Berman, Diana L. Strassman. Airline Deregulation: The Early Experience. Boston, Mass.: Auburn House, 1981.

Morrison, S. & Winston, C. (1986). The Economic Effects of Airline Deregulation. Washington, D.C.: The Brookings Institution.

Moylan, M. (2005, September 13). Northwest’s strengths should help it survive. http://www.highbeam.com/Search.aspx?q=northwest+airlines+bankruptcy%20publication:%5b%22Duluth%20News%20Tribune%22%5dDuluth News Tribune. Retrieved December 11, 1006 at http://www.highbeam.com/doc/1K1-121f0a0000057647.html.

Northwest Airlines Corporation (2006). International Directory of Company Histories, Vol.74. St. James Press, 2006. Retrieved December 9, 2006 at http://galenet.galegroup.com/servlet/BCRC?vrsn=155&locID=longbeach&srchtp=glbc&cc=1&c=2&mode=c&ste=74&tbst=tsCM&tab=4&ccmp=Northwest+Airlines+Corp.&mst=northwest+airlines&n=25&docNum=I2501310047&bConts=13247.

Northwest Airlines Corporation (2006). Hoovers Online. Retrieved December 8, 2006 at http://www.hoovers.com/northwest-airlines/–ID__17160 — /free-co-factsheet.xhtml.

---

Get Professional Assignment Help Cheaply

Are you busy and do not have time to handle your assignment? Are you scared that your paper will not make the grade? Do you have responsibilities that may hinder you from turning in your assignment on time? Are you tired and can barely handle your assignment? Are your grades inconsistent?

Whichever your reason is, it is valid! You can get professional academic help from our service at affordable rates. We have a team of professional academic writers who can handle all your assignments.

Why Choose Our Academic Writing Service?

• Plagiarism free papers
• Timely delivery
• Any deadline
• Skilled, Experienced Native English Writers
• Subject-relevant academic writer
• Adherence to paper instructions
• Ability to tackle bulk assignments
• Reasonable prices
• 24/7 Customer Support
• Get superb grades consistently

 

Online Academic Help With Different Subjects

Literature

Students barely have time to read. We got you! Have your literature essay or book review written without having the hassle of reading the book. You can get your literature paper custom-written for you by our literature specialists.

Finance

Do you struggle with finance? No need to torture yourself if finance is not your cup of tea. You can order your finance paper from our academic writing service and get 100% original work from competent finance experts.

Computer science

Computer science is a tough subject. Fortunately, our computer science experts are up to the match. No need to stress and have sleepless nights. Our academic writers will tackle all your computer science assignments and deliver them on time. Let us handle all your python, java, ruby, JavaScript, php , C+ assignments!

Psychology

While psychology may be an interesting subject, you may lack sufficient time to handle your assignments. Don’t despair; by using our academic writing service, you can be assured of perfect grades. Moreover, your grades will be consistent.

Engineering

Engineering is quite a demanding subject. Students face a lot of pressure and barely have enough time to do what they love to do. Our academic writing service got you covered! Our engineering specialists follow the paper instructions and ensure timely delivery of the paper.

Nursing

In the nursing course, you may have difficulties with literature reviews, annotated bibliographies, critical essays, and other assignments. Our nursing assignment writers will offer you professional nursing paper help at low prices.

Sociology

Truth be told, sociology papers can be quite exhausting. Our academic writing service relieves you of fatigue, pressure, and stress. You can relax and have peace of mind as our academic writers handle your sociology assignment.

Business

We take pride in having some of the best business writers in the industry. Our business writers have a lot of experience in the field. They are reliable, and you can be assured of a high-grade paper. They are able to handle business papers of any subject, length, deadline, and difficulty!

Statistics

We boast of having some of the most experienced statistics experts in the industry. Our statistics experts have diverse skills, expertise, and knowledge to handle any kind of assignment. They have access to all kinds of software to get your assignment done.

Law

Writing a law essay may prove to be an insurmountable obstacle, especially when you need to know the peculiarities of the legislative framework. Take advantage of our top-notch law specialists and get superb grades and 100% satisfaction.

What discipline/subjects do you deal in?

We have highlighted some of the most popular subjects we handle above. Those are just a tip of the iceberg. We deal in all academic disciplines since our writers are as diverse. They have been drawn from across all disciplines, and orders are assigned to those writers believed to be the best in the field. In a nutshell, there is no task we cannot handle; all you need to do is place your order with us. As long as your instructions are clear, just trust we shall deliver irrespective of the discipline.

Are your writers competent enough to handle my paper?

Our essay writers are graduates with bachelor's, masters, Ph.D., and doctorate degrees in various subjects. The minimum requirement to be an essay writer with our essay writing service is to have a college degree. All our academic writers have a minimum of two years of academic writing. We have a stringent recruitment process to ensure that we get only the most competent essay writers in the industry. We also ensure that the writers are handsomely compensated for their value. The majority of our writers are native English speakers. As such, the fluency of language and grammar is impeccable.

What if I don’t like the paper?

There is a very low likelihood that you won’t like the paper.

Reasons being:

• When assigning your order, we match the paper’s discipline with the writer’s field/specialization. Since all our writers are graduates, we match the paper’s subject with the field the writer studied. For instance, if it’s a nursing paper, only a nursing graduate and writer will handle it. Furthermore, all our writers have academic writing experience and top-notch research skills.
• We have a quality assurance that reviews the paper before it gets to you. As such, we ensure that you get a paper that meets the required standard and will most definitely make the grade.

In the event that you don’t like your paper:

• The writer will revise the paper up to your pleasing. You have unlimited revisions. You simply need to highlight what specifically you don’t like about the paper, and the writer will make the amendments. The paper will be revised until you are satisfied. Revisions are free of charge
• We will have a different writer write the paper from scratch.
• Last resort, if the above does not work, we will refund your money.

Will the professor find out I didn’t write the paper myself?

Not at all. All papers are written from scratch. There is no way your tutor or instructor will realize that you did not write the paper yourself. In fact, we recommend using our assignment help services for consistent results.

What if the paper is plagiarized?

We check all papers for plagiarism before we submit them. We use powerful plagiarism checking software such as SafeAssign, LopesWrite, and Turnitin. We also upload the plagiarism report so that you can review it. We understand that plagiarism is academic suicide. We would not take the risk of submitting plagiarized work and jeopardize your academic journey. Furthermore, we do not sell or use prewritten papers, and each paper is written from scratch.

When will I get my paper?

You determine when you get the paper by setting the deadline when placing the order. All papers are delivered within the deadline. We are well aware that we operate in a time-sensitive industry. As such, we have laid out strategies to ensure that the client receives the paper on time and they never miss the deadline. We understand that papers that are submitted late have some points deducted. We do not want you to miss any points due to late submission. We work on beating deadlines by huge margins in order to ensure that you have ample time to review the paper before you submit it.

Will anyone find out that I used your services?

We have a privacy and confidentiality policy that guides our work. We NEVER share any customer information with third parties. Noone will ever know that you used our assignment help services. It’s only between you and us. We are bound by our policies to protect the customer’s identity and information. All your information, such as your names, phone number, email, order information, and so on, are protected. We have robust security systems that ensure that your data is protected. Hacking our systems is close to impossible, and it has never happened.

How our Assignment  Help Service Works

1.      Place an order

You fill all the paper instructions in the order form. Make sure you include all the helpful materials so that our academic writers can deliver the perfect paper. It will also help to eliminate unnecessary revisions.

2.      Pay for the order

Proceed to pay for the paper so that it can be assigned to one of our expert academic writers. The paper subject is matched with the writer’s area of specialization.

3.      Track the progress

You communicate with the writer and know about the progress of the paper. The client can ask the writer for drafts of the paper. The client can upload extra material and include additional instructions from the lecturer. Receive a paper.

4.      Download the paper

The paper is sent to your email and uploaded to your personal account. You also get a plagiarism report attached to your paper.

PLACE THIS ORDER OR A SIMILAR ORDER WITH US TODAY AND GET A PERFECT SCORE!!!

---