Doomed or Destroyed:
The Effects of September 11th on the United States Airline Industry
Hayes Maddox
Oklahoma State
University
April 24, 2013
Abstract
September 11, 2001 is a day that changed the world forever.
The attacks on that dark day affected the industries of the world in many
different ways; however, no industry was affected more than the United States
airline industry. The obvious effects of September 11 on the airline industry and
its’ employees are commonly known: death, destruction, insecurity, sadness,
fear and anger. However, beyond their own personal and highly emotional account
of the attacks, many people do not know the lasting effects and changes that
September 11 had on the airline industry.
This research paper discusses the lasting economic,
emotional, and safety repercussions that fateful day had on the airline
industry in the United States. Many scholars have published their opinion on
the before and after of September 11. Through interviews, professional opinions,
statistics, and historical comparisons, this paper examines whether September
11 single handedly caused the airline industry’s downfall or if it was destined
for failure long before September 2001, while also relating the positive and
negative effects of the attacks on the United States airline industry to the its
continued recovery.
Doomed or Destroyed: The Effects of
September 11th on the United States Airline Industry
The United States Airline industry is a
very complex system consisting of many different airlines, government agencies,
airport employees, air traffic controllers, and passengers. The government
regulated much of the airline industry up until the Airline Deregulation Act in
1978, which essentially freed the airlines from any governmental oversight and
restrictions (Alfred 1993) The act would prove to have both a positive and
negative effect on the airline industry. Before deregulation, the federal
government controlled aspects of the industry such as flight routes, ticket
prices, and employee wages. Federal control of the airline industry ensured
that airlines had a fair chance to be competitive in the industry. After
deregulation, however, the industry changed dramatically. With no federal
control, the large airlines were able to lower their ticket prices dramatically
to drive the smaller airlines out of business. The industry went through a
period of uncertainty as it evolved to deregulation. As a result, the industry’s
economy entered a roller coaster of ups and downs, but it always ended up
higher than before after every decline. Coincidentally, the airline industry
economy was at an all time historical low during the summer and fall of 2001.
At the time, a lot of economists were questioning whether the airline industry
was finally failing as a result of deregulation or if it was just a typical low
in the cyclic nature of the industry. In the middle of this speculation, the
unthinkable happened. On September 11, 2001, terrorists attacked the United
States by hijacking several airliners, crashing them into the World Trade
Center towers in New York City, as well as two other locations in the Northeast
United States. The attacks killed thousands and left a huge black eye on the
United States and the airline industry in particular. Even though the airline
industry was struggling before September 11th, the emotional,
economic, and political effects of the attacks were the sole reason that much
of the airline industry within the United States failed.
Americans young and old will always
remember exactly where they were and what they were doing when they heard about
the terrorist attacks of September 11th, 2001. The United States of
America changed forever when American Airlines flight 11 crashed into the North
Tower of the World Trade Center at 8:46 AM on September 11th, 2001.
America was changed even further as it watched helplessly as the rest of the
events unfolded on that fateful day. At 9:03 AM, United Airlines flight 175 hit
the South Tower, immediately killing all 65 people aboard the aircraft and
countless more in the tower. Then, yet another hijacked airplane crashed into
the Pentagon at 9:37 AM. The final hijacked airplane was crashed in rural
Pennsylvania at 10:03 AM as a result of heroic passengers actions. America was
left with horrific images of airliners crashing and turmoil in one of the
nations largest metropolitan areas, leaving an emotional scar on the entire
country that would be tough to overcome.
The emotional toll that September 11th
had, and still has today, on employees within the airline industry still
effects them today. Many pilots and flight attendants were airborne at the time
of the attacks. Captain Steve Brashear was flying from Sacramento to Denver on
the bright and sunny morning of September 11th, 2001. The flight was
normal up until the moment Captain Brashear received a message from his airline
saying “possible hijack in progress at [New York] and it is shut down due to
World Trade Center crash of two large aircraft” (Brashear 2011). Captain Brashear
remembers being “lost for words” and “emotionally confused” after reading that
message. Then, about two minutes later, the company sent a message saying
“nationwide ground stop in progress. All aircraft.” (Brashear 2011). At that
moment, Captain Brashear knew the United States had been attacked. For the
first time, he was scared to fly. Up in the air, Captain Brashear had almost no
way of knowing the extent of the attacks. For all he knew, his airplane could
be next; a helpless feeling that has been stuck in the back of his mind ever
since. When he was finally safe on the ground and safe in a hotel room, Captain
Brashear, like every other American that day, “positioned [himself] in front of
a TV screen and watched the grim truth” (Brashear 2011).
Many flight attendants, air traffic
controllers, ground crew, and even customer service agents were affected as
well. Many workers refused to work, while others exercised extreme caution
while on the job. Some flight attendants went as far as to inventory the cabin
for items that they could use as weapons in the event of an attempted hijacking
(Ward 2002). The overall emotional toll of September 11th on airline
employees greatly effected the day-to-day operations of airlines. When airline
flights resumed on September 15th, airlines were left to fend for
themselves despite the fact that many of their employees were either
emotionally unfit to work or had quit as a result of the attacks.
The emotional effects did not stop with
airline employees, however. Every American was affected by the September 11th
attacks. Feelings of anger, sadness, uncertainty, and fear took over. Many American
citizens were now afraid to fly on airlines for fear of another attack. The USA Today describes the attacks as
“shaking the citizens of the United States in a profound way”, and accurately
so. The emotional effect on the United States as a whole was so profound that
Jane Garvey, the administrator of the Federal Aviation Administration, compared
that single day’s emotional trauma to events such as Pearl Harbor and the
entire Vietnam War (Garvey 2002).
Despite all of the negative emotions that
September 11th brought to the American people, however, the absolute
purest in American spirit came to the surface and eventually prevailed (Brashear
2011). American flags appeared all over the country, people enlisted in the
Armed Forces, and the entire country came to the aid of New York City. The
spirit of patriotism would help propel the United States through the resultant economic
effects of September 11th.
The United States airline industry was,
undoubtedly, in a poor economic state during the early 2000s. The CEO of
Continental Airlines in 2001, Frank Lorenzo, blames the airline industry’s
financial struggles on the skyrocketing labor costs of the late 1990s, which
forced many airlines into contracts that increased wages by over 20% (By 2001).
The contracts did not really begin to take their toll on airlines revenue until
early 2000 when the “bad business conditions” and extremely poor stock market
caused a major cut in business travel. Some airlines saw an 18% decrease in
their revenue even before September 11th (By 2001). The poor
economic conditions in the 12 months prior to September 2001 stretched the
airline industry’s economic rubber band closer and closer to its breaking point
until it finally snapped on September 11th (By 2001).
The United States airline industry did
not just snap after September 11th, it shattered into a million different
pieces. Everyone within the airline industry knew that it would never be the
same. Airlines lost billions in revenue and saw huge declines in passenger
traffic and airline revenues fell more than from $130.2 billion in 2000 to
$107.1 billion in 2002 (IATA 2011). To help airlines cope with the financial
problems immediately following September 11th, the federal
government passed the Safety and System Stabilization Act on September 23, a
mere 12 days after the attacks. The act immediately offered airlines $5 billion
in compensation and a further guarantee for $10 million in loans (IATA 2011).
The government help, however, was not enough to even make a dent in the losses
airlines incurred as a result of September 11th and the airlines
continued to lose money. The financial impact was not short lived, either. It
took three years for airlines to recover the $22 billion in lost revenue during
the short year after September 11th (IATA 2011). Even worse, the
losses kept adding up to a grand total of $57.7 billion in 2005, only to be
stopped in 2006 by the industry’s first profitable period since the attacks.
September 11th had one more surprise up its sleeve for the airline
economy, however. The War on Terror that resulted from the attacks drove jet
fuel prices sky high in 2008, resulting in a $26.4 billion loss for airlines in
2008-2009 (IATA 2011).
The airline industry earned $3.6 billion
in 2010 for a grand total of just three years of profitability since the
attacks in 2001. However, even this little bit of recovery came with a giant
price. Economic struggles after September 11th caused over 15 United
States based airlines to shut down completely and dozens more to file
bankruptcy (IATA 2011). Between December 2002 and October 2005, United, Delta,
Northwest, and US Airways, a majority of the nation’s largest airlines, had
filed for bankruptcy. September 11th had single-handedly brought the
airline industry’s economy so low that it could not survive without federal
aid.
As if to add insult to injury, the
federal government began imposing significant security fees on airlines. The
attacks of September 11th revealed a major weakness in aviation
security, which, at the time of the attacks, was supervised by individual
airlines with little government supervision. The airline-controlled security
system had many flaws, the major flaw being the working relationship between
the airport management and the airlines. In order to keep the FAA pleased, the
airport management would let the airlines know when the FAA was going to come
in and inspect their security practices. The practice of “tipping off” airlines
resulted in an extremely high rating for the airlines’ security, but the rating
was highly inaccurate. The FAA widely overlooked this practice prior to
September 11th in an effort to keep high safety ratings (DelGauldo
2010). In an effort to improve aviation security after September 11th,
the federal government decided to take full control of aviation security. The
industry began a transition to more federal regulation and uptight security
(Garvey 2002).
The government created the Transportation
Safety Administration on November 19, 2001 in order to federally control
aviation security (TSA 2013). The TSA was launched with 30 initial goals ranging
from taking over aviation security from the FAA, hiring and training enough
staff to man over 400 commercial airports, and developing a screening process
to screen 100% of checked bags (TSA 2013). The TSA met all of these goals in
less than 12 months, a major accomplishment. Both lawmakers and airline
passengers praised the TSA’s initial success. As the TSA matured, however, it
lost popularity extremely fast. Airline passengers began to see the TSA as a
giant hassle and waste of money. Airline passengers pay over $1.8 billion in
additional fees, over 400% more than pre-September 11th, to help pay
the $10 billion per year TSA price tag (Martin 2011). In addition to the $10 billion
price tag, the TSA began to cause more struggles for airline passengers. Roger
Dow, president of the United States Travel Association, criticizes the TSA,
saying, “long TSA lines don’t improve airport security” (Martin 2011). Many
aviation security experts do not believe that the TSA would even hasa 50%
success rate in stopping a terrorist attack such as September 11th
(Martin 2011). The TSA has fallen victim to the same “tip-off” problems of the
airline based screening, except this time the TSA was tipping off its own
screeners to look better in front of Congress. Airline passengers have become
progressively more annoyed by the TSA’s ineffective and inconvenient security
screening. The TSA alone has caused a 6% reduction in airline travel and $1
billion in losses to United States airlines, adding to the economic toll of
September 11th (Logan 2008). When the hefty price tag of the TSA is
combined with the amount of passengers lost due to the inconvenience of the
security lines, the TSA becomes a major culprit in the failure of the United
States airline industry.
Despite the proven effects of September
11th, some economists still believe that the industry was on a road
to failure even prior to the attacks. While it is true that business passengers
flying on expensive unrestricted fare tickets declined sharply in mid-2000 as a
result of the failing United States economy, it is unrealistic to expect that
the airlines would not have recovered economically at the end of the depression
just like every other industry did. It’s no coincidence that the industry
experienced its sharpest revenue loss in history directly after September 11th.
Some economists, such a Frank Reeves, even believe that September 11th
actually lessened the effects of the collapse of the airline industry because
it provided "a golden opportunity for airline management to write off all
the bad decisions they made over the last 10 years.” Nothing could be further
from the truth. Airlines that were struggling before September 11th,
such as United, already had plans to cope with the ailing economy without
furloughing employees. They ended up furloughing 20,000 employees after
September 11th (Ward 2002). It is blatantly obvious that September
11th put the dagger in an industry that would have otherwise
recovered on its own.
September 11th left an
everlasting scar on the United States airline industry. The effects of that day
over a decade ago are still felt today. Things such as increased airport
security, more expensive airfare, and even a war in the Middle East all stem
directly from September 11th. The attacks of September 2001 caused much
of the airline industry in the United States to fail. The emotional, economic,
and political effects of September 11th put the final dagger in an
industry that was struggling economically. Effects of September 11th
were not all bad, however. If the attacks had never happened, Osama Bin Laden
would have never been killed, the Patriot Act would have never allowed the
government to investigate suspected terrorists living in America, and America
would have never experienced an event that brought a true sense of patriotism
to the entire country. September 11th tested Americans will to
fight, and we passed the test with flying colors by fighting the terrorists
responsible, enduring a economic depression, and rebuilding what was lost.
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