This is probably another recent example where a system that operates with very little slack can have massive failures due to localized perturbations in network dynamics.
> we need a global reckoning on the tradeoff between efficiency and resilience
Why?
Southwest operates on a thin operating margin. It passes that cost saving (and risk) on to its customers. If someone needs high certainty, there are other providers (and other fare classes), but you'll be paying up for that service and redundancy.
If we were talking about base utilities, I'd get the argument. But passenger airlines?
Passenger airlines aren’t just any other business.
First they deal with travel, which is a Constitutional Right (of course that’s a general right not a specific right travel by passenger airline, but still there is no constitutional right to “utilities”). To that end most passenger transportation services are public utilities and regulated as such.
Airlines for the most part operate on government owned property, a federal agency (TSA) does security checks on customers, a federal agency (FAA) regulates equipment/employees/operations, and undercover federal marshals often secure planes during travel.
Ironically CEOs from the airline industry have previously come out asking to be regulated as utilities specifically because competition makes the industry financially unviable. It is an industry that has received taxpayer bailouts.
I think it's a bit of a stretch to say a single airline having canceled flights infringes upon individual liberty. Not only is every other airline still functioning, but there are other modes of transport. Taking someone's passport without due process infringes upon liberty, but this is not that.
> they deal with travel, which is a Constitutional Right
No, it is not.
Air travel has been held up by zero courts as a Constitutional right, which is why the federal government can restrict it. Even interstate travel isn't a Constitutional right, which is why it, too, can be restricted with solely administrative procedures.
> that’s a general right not a specific right travel by passenger airline, but still there is no constitutional right to “utilities”
There is no Constitutional right to "utilities," either, which is why power and water companies can cut you off if you don't pay, just a variety of legal rights.
It would be nice if there was some way of educating the consumer.
But even if you did let people know that the Delta flight is $60 more and has a 40% less chance of being cancelled, people would still go with southwest.
Because for most consumers $60 is more valuable that 1% vs 0.6% cancellation rate [0], as it matters only once in 250 flights, which for an individual effectively means never.
[0] numbers pulled from thin air but consistent with your 40%.
It's not just the rate of exceptional events, but what happens when the exceptional event occurs.
1. Miss your flight? They will try to book you on another. That's why load factor is important -- to find that extra seat. Low cost airlines have higher load factors (more efficient) so they are less able to accomodate you.
2. Bigger problem? There are reciprocity agreements to fly with a different airline. Low cost airlines don't have the same coverage, so again less able to accomodate you.
It's just a general principle of efficiency versus robustness. With the low cost airline you are choosing the more efficient/less robust option. So when something goes wrong, it will be more painful.
That extra pain is more important than differences in the rate that things go wrong.
Other perks, like more value to frequent flyer miles, availability of first class, being able to pick your seat, etc, also play a role.
Yeah, when something goes wrong it will be more painful, but that's why it's cheaper and the odds of it happening are low. There are many times people travel where leaving a day late isn't a big deal.
It's an interesting thought, but I think the problem is that flight cancellations are, historically, pretty rare. Pulling from the Bureau of Transportation Statistics[1], for the 12 months from July 2020 to July 2021 (the most recent month with posted statistics), Southwest cancelled 1.5% of flights and Delta closer to 0.5%. Now, that does mean that you're 3x more likely to have your flight cancelled on Southwest, but 1.5% is pretty small to begin with.
People are pretty bad at assessing risk to begin with, so how do we judge how much that 1% reduced chance is worth? Is it actually worth $60? It's a value judgement, and I think you'd find that if you gave people the info, they'd still go with Southwest, but not because they're uneducated, but because it's hard to quantify what you're buying with another airline.
An economy ticket generally consists of two or more flights and is generally round trip, so that 1.5% could add up to a significant chance of being late. Add the chance of "mere" lateness to one airport resulting in missing another flight and you a significant chance of being delayed each trip.
Most cancelled flights are about weather, all money can buy is pilots more will to take risks. . As they say, 'there are old pilots and there are bold pilots; but there are no old and bold pilots'. So I'm happy with cheaper pilots and cancelled flights.
I didn't say "global" because I just wanted to talk about airlines. It's not even just about economics. It's about our entire global civilization where every time resilience comes up against some other value, usually but not always money, it gets pushed aside. It's a class of problem that manifests at almost every scale. Think about just-in-time inventory for manufacturing: way more efficient, but any hiccup in any supply chain might cause the whole thing to snarl, with more downstream effects. You'll start to see it everywhere.
People are bad at assessing the danger of rare events, so it's right for regulation to protect them (just like safety regulations). Flights may be a luxury in many cases but in other cases they can be vital.
Corporate limited liability is a privilege not a right, and it's time to stop handing it out like candy.
As someone whose Southwest flight was cancelled, there's one important thing to consider with Southwest besides risk of cancellation - Southwest does not have reciprocity with other airlines.
After my flight was cancelled, I was told they couldn't rebook me until two days later (when I was scheduled to return). They also offered a whopping $200 in Southwest credit, even though I ended up having to spend $600 to get to where I was going via United.
So don't just factor in risk - factor in the impact of cancellation, which is much, much worse with Southwest, particularly when they have large-scale failures like this where everyone is trying to rebook the same few flights.
Depends on the customer. An occasional (1/year) flyer? Probably not. A frequent flyer? Yes, by direct observation and indirect anecdotes. There are also very sophisticated customers, like large businesses. They definitely look at cancellations and delays when selecting an airline.
We vote for the one we prefer every time we buy something.
Supply chain resilience is incredibly expensive insurance for very rare and relatively short term disruptive events. Covid for instance is going to put things out of whack for two or three years, but is preventing that worth paying up for the redundancy and contingency plans over the previous 100 years?
Probably not. Over the long term, efficiency wins out.
> We vote for the one we prefer every time we buy something.
This is actually not true. As a consumer my choices are constrained by retailers and suppliers (and government due to regulations). They choose based on price what to offer. If all retailers in my area don't want to supply organic food, I can't buy it.
So I have limited power to alter the market. For extremely bad options, there's the choice not to buy, but for necessities, that option is precluded.
Which is why a healthcare "free market" (hint: it's anything but free right now) is a chimera: when you or your family is dying or suffering, you are willing to pay "value based pricing".
The real solution is to delink the "global" supply chain and build up local options. Resilience also increases jobs and tax base, but reduces megacorp profits. Since we actually live in an oligarchy, profits are all that are chased.
Your vote has limited power to alter the market because it's just one vote. America chose Wal-Mart over Main Street. It's tragic, but that's what American consumers chose.
I don't know if you recall the 90s, when WalMart was on a rampage, but there was considerable local resistance all over the place from groups who understood the hazards. The opportunity to be informed was there.
I also remember how bad those small town merchants they drove out were. And in the 90s they are still 'we buy American so you don't have to'. I'll take todays Walmart over what small towns had before, though they have gone downhill.
I remember periods when I made it a point to avoid Starbucks and get my coffee drinks at a small cart near work which appeared to be family-owned. They were nice, but the product was so inconsistent in quality -- and in general -- that I finally understood that part of it.
But the rest of the reality is that you need to consider the relationship. Buying from a local-owned store doesn't really count if you're just doing a transaction and walking away. I didn't feel like discussing the drink quality, or asking for a refund, would have been appreciated, so I stopped going there. Local stores that you can't develop a relationship with might as well be megachains. Local stores that you don't WANT to develop a relationship with, making yourself a little vulnerable in the process, are another matter. America didn't just want cheap and/or consistent goods, they didn't want to have to interact with the people they were buying them from. And that's the real sad part.
There should be a name for the fallacy of expecting people to "vote" with their dollars on every single issue all of the time.
It's like the opposite mistake that communists make. They expect a single centralized decision maker to balance all considerations to set a price, which is inevitably ineffective.
This vote with your dollar argument expects every individual to balance all considerations to set their own personal price. There is an assumption of information symmetry and unlimited ability to analyze on the part of the individuals behind the vote with your feet argument that is just not remotely true.
I run into this conflict. Many like to regard themselves as sovereign agents who can make informed decisions for themselves. This is the ideal, and I can argue on behalf of it.
Of course, reality doesn't check out that way and the record shows it. This doesn't stop people from getting upset should you imply that they are not equipped to sensibly make their own decisions.
We are strongly encouraged to make terrible decisions all the time, and there's a lot of money behind it, from many actors.
I don’t follow your logic here. Every paragraph has questionable claims, but the last one is most glaring to me.
You are hand-waving that delinking from global supply chains somehow magically fixes the issue (I don’t see how it’s relevant to the Southwest article) and that it only reduces megacorp profits.
Local doesn’t mean resilient. Local options must have theirentire supply chain local in order to be maximally resilient. But now you are talking about removing a fundamental feature of capitalism: comparative advantage.
It is 100x more expensive to run a labor-based factory on the San Francisco peninsula than it is in the cheaper parts of East Asia. Cost of living, local talent, building and labor codes, etc all vary and contribute to costs. When a widget is made in SFBA for 50x the cost of the same widget with comparable quality elsewhere in the world, the risk of those one-in-a-century events means that the consumer is paying 10x more for most of their costs for the 99/100 years they don’t need the risk mitigation.
Also, your plan to delink cuts across the de facto way things work, so now you have to invent a way to convince Americans to pay 10x more for some obscure risk issue they will have forgotten about in 4 years. Are you adding massive import taxes/tariffs, outlawing imports, or do you just expect voluntary compliance?
> We vote for the one we prefer every time we buy something.
Not really, no. We can probably count on more resilient products being more expensive, but we can't count on more expensive products being more resilient. It doesn't work that way. There is really no way for an average consumer to know which expensive products are expensive because they are sold by resilient companies, and which are expensive for innumerable other reasons. Most purchases are made by people who lack the knowledge, experience or training that would be required to evaluate the resilience of a business.
Voting for something without knowledge about that something is farcical. Ultimately this "voting" is little more than rhetoric used to push the blame onto those with the least insight into how the system works.
Delta is the airline that abandoned me for 40 hours in ATL of all places, while Southwest has never let me down. If you had asked me a week ago which of the two was more reliable, I would have told you Southwest and I would have meant it absolutely.
How would you have me judge them? I don't know anything about how to run an airline and I wouldn't even know where to start if you asked me to look up which of the two had a more resilient business model. You can't really expect any random air traveler to have an opinion on airlines better informed than their personal experiences. I think most people would struggle to tell you something so basic as what sort of plane they were even sitting in.
The best phrasing I've heard is something like this: the more closely adapted a system is to one environment, the less adapted it can be to other environments. So by being very closely adapted to the steady state environment, it cannot be adapted to disrupted environments.
You may be right, but airlines are either the canary in the coal mine or an exceptional case. They operate on incredibly, incredibly small margins so vulnerability to small disturbances is, at least in this industry, totally expected. I.e. not necessarily true for other trade sectors.
> They operate on incredibly, incredibly small margins
I've never understood how an industry so hard for competition to get into, so defensively positioned with regulatory capture, and so overpriced and gouge-happy from a consumer PoV, can somehow manage to be barely scraping by. What is going on at the airlines where they seemingly can't make ends meet despite a silver platter cornered market?
I think it's basically free to fly -- if you buy a $200 airline ticket, you are using $200 worth of fuel (total fuel / airplane capacity), aircraft depreciation, crew costs, etc. The airline can only make money because they figured out how to sell someone else a $300 ticket for their $200 worth of stuff. It's a precarious model, because if they sell you the $200 ticket but don't ever sell the $300 ticket, then they just lose money. Once the boarding door closes, there is no way to ever gain money on that flight.
The "gouging" is just to appeal to the truly cost sensitive; people with no brand loyalty, time constraints, etc. If you don't want a soda, a checked bag, a seat assignment, and the option to choose from 10 different times of day to leave... but do want $50 in cash... they have you covered. It rubs people the wrong way, but people "sort by lowest price first", not by "lowest hassle first", so they have to account for that somehow. (Tangent: I never really understood this. I feel like air travel would be way smoother if people checked their bags instead of fought each other for overhead bin space. They should charge for the bins, not for the cargo hold. But I guess that's too hard in practice.)
If you had an airline that just charged actual cost + desired profit for a certain load factor, the ticket would be $1000. Then someone else would show up and charge $999 because they can pay for a slightly less well-trained flight attendant. Then someone else comes along and puts the rows of seats 1" closer together. Eventually the price is what we pay today, because all that actually happened. I think the industry is so hyper-optimized that it's basically "free" to fly; you're just paying for transport at cost, or even less than cost if they have done their yield management correctly and you got the lowest fare on the flight. That's why the industry is so sensitive to disruptions -- it's balancing on a razor thin margin, because there are competitors ready to make $1 less to get your butt in their seat.
Anyway, I think your assertion about a silver platter cornered market is simply wrong. Flying is ridiculously inexpensive compared to the costs. As a comparison, get your ATP certification, buy a 737, and fly your friends around in it. Pretty expensive compared to a ticket on Southwest!
> Once the boarding door closes, there is no way to ever gain money on that flight.
What about in-flight food and alcohol? In-flight wifi/movies/media? Does Sky Mall pay a commission? I'd be curious how much all of those things add in revenue after the door closes.
It's not really that hard to get into the airline business. There are usually a couple of new (small) airlines every decade. Equipment is easy to lease, maintenance is easy to contract, staff is ok to find when you don't need a lot. You might not be able to get slots where you want, but there are a lot of airports, you can find slots somewhere, and you can do business with a handful of routes.
But there is a lot of competition; wikipedia lists 10 major (doing $1B annually) US 'mainline' passenger airlines, and three more major regionals (although one is a subsidiary of a mainline). It's hard to stay non-competitive with 11 other big companies doing the same things as you; especially when non-majors can compete too.
That's not to say there's no gouging, there is a lot of opaque pricing and nickle and diming. But, if your route is served by multiple carriers, there's probably not a lot of consistent profit there. If you're flying out of a small airport that does two flights a day and the nearest airport is a 4 hour drive, there may be some more profit there, but it depends on utilization.
They have been underpricing themselves to maintain position against other companies. Regulations keep costs increasing. Unions keeps labor prices increasing.
Did you expect your $200-300 cross-country flight to really give much of a profit to airlines after airport taxes, landing fees, fuel, maintance costs plus labor, insurances and everything else?
Those flights should cost 10x as much if you want the golden treatment fliers received in the 60s.
Warren Buffet has long since described the aviation industry as over competitive. This was decades ago, before the low cost airlines even entered the picture.
Airlines are a great example of competition driving prices down for consumers.
This is a little bit misleading. You have to look at the entire history of the industry. A lot of consolidation has happened to eliminate competition. And pretty much every legacy airline has declared bankruptcy except for coincidentally, Southwest. Largely due to their founders strategy of avoiding overly leveraging the company. So much so that at one point during the pandemic when other airlines were overleveraged, their stock price did not crash and they were the most valuable airline in the country by a considerable amount.
When I need to fly somewhere I look around and choose the cheapest way. Maybe they really are pinched and can't raise prices without loosing too many customers.
The problem is that capitalism (as it is currently configured) strongly incentivizes short term efficiency. Very few organizations plan for long tail events because it almost inevitably hurts short term expected value, even though long term expected value would potentially benefit.
