A translation of the airlines’ “open letter” to customers
July 12th, 2008by Christopher Elliott
The airlines need you. In an open letter to customers published late yesterday, the chief executives of 12 domestic airlines urged customers to help them stop the oil speculation and bring fuel prices under control.
It sounds like a reasonable request. Until you consider who’s making it.
Here’s what the airlines say — and what they really mean:
Our country is facing a possible sharp economic downturn because of skyrocketing oil and fuel prices, but by pulling together, we can all do something to help now.
Translation: High fuel costs are going to push half of us into bankruptcy. We need you to bail us out.
For airlines, ultra-expensive fuel means thousands of lost jobs and severe reductions in air service to both large and small communities. To the broader economy, oil prices mean slower activity and widespread economic pain. This pain can be alleviated, and that is why we are taking the extraordinary step of writing this joint letter to our customers.
Translation: The fat executive bonuses that we’ve paid ourselves over the years are threatened. We don’t care about air service to your pitiful little communities. The only pain we really care about is that we can’t afford that third home in the Virgin Islands. This pain can be alleviated by you.
Since high oil prices are partly a response to normal market forces, the nation needs to focus on increased energy supplies and conservation. However, there is another side to this story because normal market forces are being dangerously amplified by poorly regulated market speculation.
Translation: We’ve been speculating about air fares ever since the government has allowed us to do it. Gee, we hope you don’t see the irony in our request. You know, that’s it’s OK for us to change an airfare every 10 seconds, but it’s not OK for someone to do the same thing with fuel.
Twenty years ago, 21 percent of oil contracts were purchased by speculators who trade oil on paper with no intention of ever taking delivery. Today, oil speculators purchase 66 percent of all oil futures contracts, and that reflects just the transactions that are known. Speculators buy up large amounts of oil and then sell it to each other again and again.
A barrel of oil may trade 20-plus times before it is delivered and used; the price goes up with each trade and consumers pick up the final tab. Some market experts estimate that current prices reflect as much as $30 to $60 per barrel in unnecessary speculative costs.
Translation: We hope no one brings up the simplicity and common sense of fares before deregulation. Ahh, the good ol’ days.
Over seventy years ago, Congress established regulations to control excessive, largely unchecked market speculation and manipulation. However, over the past two decades, these regulatory limits have been weakened or removed.
We believe that restoring and enforcing these limits, along with several other modest measures, will provide more disclosure, transparency and sound market oversight. Together, these reforms will help cool the over-heated oil market and permit the economy to prosper. The nation needs to pull together to reform the oil markets and solve this growing problem. We need your help.
Translation: We’re asking the government and you, the taxpayer, to help us. But we pray to God that no one sees the extreme irony of an industry that has resisted any kind of government regulation and has taken its customers for granted, asking for help.
One final note. This letter is correct in one respect. Both the government and passengers can help.
American travelers can push for meaningful airline industry regulation and the government can comply by passing it. Now.
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