Washington Post business columnist Steven Pearlstein had his own version today of a James Kunstler column on our economic “readjustment” going on right now — just without JK’s colorful metaphors. Most of it is about all the “mirage economies” and the bubbles that were all very related to each other. But there was one interesting nugget about the fundamental repricing of airline travel going on right now, which perhaps surprisingly is not 100% about skyrocketing fuel prices.
The reality is that for too many years, airlines have sold too many tickets at prices that failed to reflect the real cost of providing the service passengers want and expect. That includes such things as cleaning planes; handling reservations, check-ins and baggage without undue waiting; serving a decent meal when necessary; and treating passengers fairly when flights are canceled. But they also include costs that may be less obvious, like keeping up with preventive maintenance, hedging fuel costs, paying a decent wage to front-line employees, investing in modern air traffic control systems, and paying a price that reflects the true value of scarce air space and landing rights.
Airline executives will say that if they were to charge enough to reflect all these costs, they would have many fewer passengers. That’s the point: A sustainable equilibrium will inevitably involve a smaller industry with fewer planes, fewer flights, fewer passengers and fewer employees.
So with airline travel continuing to scale back if the economy continues “readjusting” and fuel prices continue to escalate, what is going to be the alternative for speedy, cost-effective, city-to-city travel?
With 1/3 of all flights measuring 350 miles or less, a big national investment in improved passenger rail or even new high-speed corridors (H/T to Ryan and Yglesias) could prove a boon to our economy: Investing national wealth into something that will create new jobs, new industry, keep cities connected, and cut down on the oil consumption that sends more money overseas.