FLYING LOW
by
Representative John Cowdery
In a recent letter to Alaska Airlines, twelve members of the legislature said we were disturbed at their high fares and inadequate service to southeast and rural Alaska. We pointed out that published discounts are too few and difficult to qualify for. We attributed this condition to the lack of competition. We also said we wanted the airline that bears the state's name to conduct itself like the State mattered to its existence.
Alaska Airlines responded with a public relations/lobbying attack against the legislators. Many Alaskans, especially in Anchorage, are not touched by the monopoly related problems. They wonder, "why are legislators picking on Alaska Airlines." Here is the rest of the story.
Alaska is more dependent on airline service than any other state in the U.S. We abolished the state's airline regulation in 1985. We believe that competition is the best kind of regulation. Yet, today, 190,000 Alaskans are subject to Alaska Airlines' monopoly air service.
It's not a problem for most Anchorageites who travel to the lower 48. Competition between Anchorage and Seattle keeps the fares at reasonable levels. However, once removed from the competitive routes, Alaskans are at the mercy of poor service and the highest air fares in the U.S. The fares are higher than can be justified by high operating costs peculiar to certain Alaskan locales.
In the absence of a regulatory body, and in the absence of competition, there is no place for airline customers to get relief when monopoly power works against them. The legislature is the last line of protection. We are obliged, having removed the regulatory mechanisms, to take up the cause against monopoly abuse in defense of consumers. This is especially true with basic industries that are so vested with public interest and necessity.
Still, our legislative options are few. We can restore regulation, but nobody believes that re-regulation is best for the long run. Nor would we want to engage in any kind of punitive tax legislation. What's left? The time honored technique of "jawboning", whereby we generate public discussion about an issue until corrective action is taken. Jawboning only works when the threat of more severe action is a possibility. If Alaska Airlines remains intractable about the issues we raise then each legislator will have to examine their options anew.
A few examples will help illustrate what's wrong. Alaska Airlines' Anchorage-Juneau schedule requires two overnight stays in Juneau in order to get the discounted, three-day advance purchase fare of $220. This schedule adds $200 in hotel costs to the expense of the trip, assuming people could afford the time, in addition to the money.
We try to make the legislative process in Juneau accessible. It can't be accessible if it is not affordable. Alaska Airlines' pricing and scheduling are a huge dis-incentive for people to come to Juneau. Alaska Airlines is the new, best argument for moving the capitol.
Their reduced fare for a 21 day advance purchase would be acceptable if we could all plan our trips 21 days in advance. But sometimes our need to travel is on short notice. The cost to Alaska Airlines is the same whether we purchase a ticket 21 days in advance or the day of travel. We wonder why they penalize customers who must travel on short notice. Emergencies are always short notice. They are the times we can least afford high fares.
Alaska Airlines Chairman John Kelly, says, "we approach every market as if we had a competitor." However, when they actually had a competitor in southeast, their prices were consistently much lower. If his statement was true, then obviously their current prices would be closer to what they were when they had competition. Obviously, Mr. Kelly's statement is not true.
Alaska Airlines charges Alaskans more than they charge lower 48 passengers:
Ketchikan to Seattle, 678 miles, is $344. Seattle to San Francisco, 672 miles, is $61. Wrangell to Petersburg, 32 miles, is $73.
Seattle to Spokane, 280 miles, is $73. Ketchikan to Juneau, 200 miles, is $150.
Their Anchorage to Seattle and Seattle to L.A markets are competitive and their pricing reflects it. Seattle-L.A. is about the same distance as Bethel to Juneau and the fare is $176 roundtrip with a seven day advance purchase. Bethel to Juneau is $420 with a 21 day advance purchase. Bethel to Anchorage with a one night layover and continuation from Anchorage to Juneau, is over $700. We must ask ourselves if rural and southeast Alaskan markets are subsidizing their competitive markets in the lower 48.
Furthermore, Alaskans who pay the higher fares are being hoodwinked in the frequent flyer program. A customer flying from Seattle to L.A. pays 19 cents per mile. A customer flying from Bethel to Juneau pays 43 cents per mile. Yet, both customers accrue the same mileage on their frequent flyer plan. Typically, intra-Alaska customers pay more than twice as much to accrue mileage in the Frequent Flyer Plan.
Passenger fares are also inflated due to Alaska Airlines policy of allocating all costs to the passenger portion of their flights that carry both passengers and cargo.
Cargo rates mirror the same pattern as passenger rates. They are disproportionately high on monopoly routes.
Still another factor that should lower passenger fares in southeast Alaska is that Alaska Airlines receives federal subsidy of $5 million to serve Yakatat, Cordova, Petersburg and Wrangell. Despite the subsidy, fares to these cities remain inordinately high.
Alaska Airlines provided a "survey" of lower 48 city-pairs they considered comparable to city pairs in Alaska. They compared Juneau-Seattle with Raleigh-St. Louis and Nashville-Minneapolis and others.
They compared Anchorage-Juneau with Memphis-Milwaukee, Atlanta-Toledo and others.
They compared Anchorage-Nome with DeMoines-Detroit and Allentown-Cincinnati and others.
These comparisons are misleading and largely irrelevant. Nearly all of them have alternate airports, and alternate air service, within an hour's drive. They do not compare to unique conditions in rural and southeast Alaska such as:
Alaskans know that by virture of our isolation we fly more often than people in other states. Airline Transport Weekly is quoted as saying Alaskans fly 17 times more than the national average. Juneau, by virtue of being both roadless and the center of government, has a disproportionately high volume of air traffic for its population. Hence, the comparisons are way off the mark. However, they do reveal how far removed from Alaskan circumstances, Alaska Airlines management has become.
We've watched as Alaska Airlines moved its headquarters out of Alaska, then its maintenance center, then its reservation system and operators. They've withdrawn from the travel industry's statewide, cooperative marketing program, and, the Southeast Alaska cooperative marketing program. We are losing still more jobs because they are locking out travel agencies from their ticketless travel system.
In days past we knew Alaska Airlines executives by sight. We saw them and talked to them on a regular basis. Now, most of us won't recognize them if we see them. But we do recognize inadequate, overpriced service, a lobbyist and an argumentative response that presumes we have no frame of reference for our views.
Though the problems related to monopoly air service do not affect all Alaskans, they affect a large number of us. They are widespread and serious. As we seek common ground between rural and urban areas on difficult issues like susbsistence and tribal government, good affordable air service is something we all agree is a necessity. Some of us in the legislature are trying to engage Alaska Airlines in a "jawboning" process rather than initiating oversight hearings, regulatory or legislative action. The ball is in Alaska Airlines court.
(Representative Cowdery is from Anchorage district 17. He is a retired pilot and contractor.)