Delta CEO Calls for More Corporate Welfare, Praises Free Markets
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In an impressive display of cognitive dissonance, Delta (NYSE: DAL) CEO Richard Anderson proclaimed this week that the US government should let the free market go to work in the airline sector, by using taxpayer money to subsidize the industry. In an interview with Robert Siegel on All Things Considered, Anderson advocated making a “volitional determination that the airline industry is a strategically important industry for the U.S.” (which sounds much better than “decide to give handouts to my business”) and adopting what he calls a National Airline Policy that emphasizes letting the free market guide airlines' decisions.
Airlines for America, the trade group to which Delta belongs, lays out what is meant by a National Airline Policy, and it doesn't look very much like a free market solution at all. The plan calls for “rationalizing the tax burden” on airlines, which, upon closer inspection, means the same thing as eliminating the federal tax on aviation fuel. Currently, aviation fuel taxes support the administration of the vital air traffic control system and provide funding for the construction and maintenance of airports, with the general treasury making a sizable contribution as well.
A “free market” solution might call for the elimination of the tax as well as the elimination of federal funding of critical air infrastructure, allowing private corporations themselves to provide funding for airports and other infrastructure. What the plan actually calls for is an increased federal role in building out next-generation air traffic control, and investing in airports. Anderson and his cohorts are therefore asking that the government use taxpayer money to build the infrastructure they rely on, and exempt them from having to pay for any of it. Rather than a free market plan, the airline industry just wants what every spoiled child wants: something for nothing.
This is particularly galling as news reports come in that despite record profits, the airline industry has no plans to reduce or even stabilize rising ticket prices. And I, for one, don't remember the airlines whining about government intervention in 2001, when Congress approved $15 billion in cash and loan guarantees to the industry. Nor was Delta complaining when they sought government protection from creditors when they filed for bankruptcy in 2005.
And Delta isn't the only airline to avoid paying their bills by using the federal bankruptcy process: American Airlines entered bankruptcy in 2011, United (NYSE: UAL) just emerged in 2006, and US Airways (NYSE: LCC) has gone bankrupt twice in the last decade. In fact, the industry as a whole is a study in the failure of free market businesses: according to the International Air Transport Association, last decade the airlines collectively lost money, over $53 billion. For free market investors, the airline industry is simply a terrible business, to be avoided like the plague. The fact that there still is an airline industry is a testament to the amount of money the government is willing to throw at it.
The fact is that no national transportation system is run as a free market enterprise. City streets, highways, bridges, airports, air traffic control, railroad tracks, ports, lighthouses; all receive generous public support, not to mention the bailouts General Motors and Chrysler seem to require every so often. The public supports transportation because most of the value that a transportation system adds does not accrue to the travelers, but to the places made accessible. Enhancing accessibility through transportation investments significantly increases the value of land, and this rise in land value is far greater than the value that travelers create by traveling. That's the reason that Disney's (NYSE: DIS) monorail and shuttle system is free: since the company owns all the land that the system connects, they make more money from the increased land value than they would from charging passengers.
So why would the CEO of a company dependent on government money, in the midst of asking for even more government money, pay lip service to the idea of a free market business? Well, I imagine that if the senior management of transportation-related businesses acknowledged just how much help they were getting from the taxpayer, they might be forced to accept the kind of compensation that taxpayers are willing to pay other officials involved in public service. They might even have to keep ticket prices in line with actual costs. The horror! As Upton Sinclair said, “It is difficult to get a man to understand something, when his salary depends upon his not understanding it.”
Daniel Ferry owns shares of Walt Disney and General Motors Company (perhaps hypocritically, but he still does). The Motley Fool owns shares of Walt Disney. Motley Fool newsletter services recommend General Motors Company and Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. If you have questions about this post or the Fool’s blog network, click here for information.