Policy-Discussion

[Barry Berg <barry.berg AT charter.net>]

On 2/22/09 8:45 AM, "Ian G (Audit)" 
<iang AT cacert.org>
 wrote:

> The real motivation for identity cards in air travel, or, the biggest
> driver, is simply commercial.  Once a ticket is sold to a person, the
> airline loses money if that person then passes on the ticket to someone
> else.  The airlines wanted identity checks in America since forever to
> kill the grey market, but were not about to justify it until 9/11 came
> along.  There was a fairly persistent grey market in airline tickets and
> if you do the business numbers you can map out how much you lose, as an
> airline, to those uncontrolled sales.  If you think about say Europe,
> and a ticket from Madrid to Berlin, which you can't take because you are
> sick, what's the chance you can sell it on eBay for half the price?
> Pretty good, really.

Not quite right Ian.  Having retired from the Airline Industry, I can assure
you that requiring a photo ID in the US goes back to well before 911 into
the 1971 actually.  Yes, it had to do with money, but not as you think.
There was this fellow named Dan Cooper (aka D.B. Cooper) who decided to take
a one way trip on a NWA 727.  After re-routing the flight dropping off a few
passengers, and getting a sizeable refund on his ticket, he must have
decided he didn't like the food on board so he left the plane somewhere over
Oregon.

No one to this day actually knows if Dan Cooper, the name on the ticket, was
his real name or not (D.B. Cooper was actually a press invention).  So to
try and provide some traceability a Government Issued Photo ID was required
on check-in, or entry to the concourses.  There was security implemented
several times due to terrorist outbreaks in the 70's

While not happy about the sales of tickets, E-Bay is a rather late comer
into the field, They really don't care so much about the sales of actual
tickets, but they do care about other people using frequent flier miles for
tickets, big time. 

In the late 1970's American Airlines started a frequent traveler program to
build loyalty among business travelers, the high profit class of travelers.
It was an attempt to make the airline the preferred choice as at the time
most business travelers specified which flights & therefore which airlines
they wanted to take.  The other airlines very quickly followed suit, so
everyone had a program.  Soon businesses started mandating that business
travelers hand over their "miles", actually back then it was coupons, so
they could effectively reduce their corporate travel budgets.  This cut into
the profit margins for the airlines, and destroyed the whole reason for the
program which was to keep motivating business travelers to use that
particular airline.

During the 80's there was a low impact war between corporations trying to
get their hands on Frequent Flier Miles, and the Airlines trying to keep
them in the personal hands of the business traveler.  They never really
cared about FF miles used for personal travel, as that just gave a
relatively small incremental cost on flights that had to fly anyway.
Anything that erodes the Sun/Mon & Thu/Fri business travel periods cut
deeply into airline corporate profits.  So Government ID was used to prevent
John Jones from using Bill Smith's Ticket to attend a business meeting
because Smith was sick.  They later backed down on this, since the tickets
were refundable anyway.  When they started issuing non- refundable business
tickets, it did come into play again.

However, all these free FF tickets were being accumulated, and someone got
the idea that they could broker them.  I worked with audit shutting down
some of these things, so I know first hand.  The deal was that they would
pay the Frequent Flier about $200-$300 for a round trip ticket, or
certificates.  They would then sell them to another traveler, for $600-$800
which was about $300-$400 less than they could buy the ticket from the
airline, and they of course kept the difference.  Now this really got the
airlines dander up.  So again this is why you had to show your ID to fly on
a frequent flier ticket.

I actually nailed one of my parents friends, I never knew who I was getting,
as we only knew the FF account the tickets were coming from.  My parents
used to winter in Hawaii from January to March with a whole gang of friends.
Now my folks could fly space available for free back then,  and if they flew
out Mon-Thu I could just about guarantee it would be first class as well.
They were flying back home with some friends when an the result of an
investigation I did caught them using an "$800 brokered" Ticket which was
confiscated at the gate, and they had to buy two $1500 One way tickets to
get back home.  The airline softened the sting a bit by upgrading them to
1st class.  My mom was aghast, even though her friend and her could sit
together in 1st on the way home.  When they got back She had to tell me what
a rotten thing my company had done to their friends.  Who would do that she
said.   She never knew exactly what I did for the airline except she knew I
was in IT, I never had the heart to tell her it was me and my SQL.

The drop off in revenue you talked about actually came after the end of the
1st Gulf war.  Airlines are cost sensitive in two areas, the price of Fuel,
and the cost of Labor/Benefits.  These make up most of the cost structure of
an airline.  At the end of the eighties, some significant wage and benefits
packages were negotiated by the unions, resulting in some high price
contracts until the mid-90's.  When the 1st Gulf War broke out the cost of
Jet fuel skyrocketed, and stayed that way for a  long while.  Travel was
down because of the war, no one wanted to go anywhere because of fears of
terrorists.  American Airlines under the leadership of CEO Bob Crandall, was
the largest airline, and the most profitable.  He was a wonderful gentleman
who was quoted as saying to his employees, "If you want a friend, by a dog."

It occurred to Crandall, that he could make more money by eliminating the
competition, and becoming the biggest player in an oligarchy, if he couldn't
manage to be a monopoly.  So he dropped prices to lose money on every
thicket, counting on the sizable cash reserves AA had to tide them over.  He
knew he could recoup any monies lost with much higher prices after the
weaker airlines went broke and disappeared.

Everyone had to follow suit.  It is a axiom in the airline business that if
you can cut your prices just two hours ahead of the competition you stand to
make millions of dollars more.  So everyone had to follow, hoping this was a
short term thing.  Pan-Am was gone by then because the Law Suits from
Lockerbee drove them out of business.  But TWA and US Air both were about to
succumb as well as some smaller players by this thing.  My own company
barely survived, we were number 4 and one of Crandall's mentioned targets.

Still in the end this strategy, got away from Crandall, and fuel prices shot
up, and the whole industry lost in a few months the entire cumulative profit
it had made in the previous 60 years. Even American was looking at the
reaper in the end. The European Airlines weren't to much affected by this as
most were still Government Owned and subsidized.  About this time Open Skies
blew apart the exclusive destination rights of the players, which coupled
with an economic malaise pretty much took the wind out of the US Airline
Industry, and just about brought it down, till about 1996.

Then came e-bay and 9/11 etc, etc.

Regards,
==barry

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