[AADFW]

The reason that any given airline won't simply "raise the fare" instead of charging more for value-added services is consumer price sensitivity at the time of ticket purchase. When consumers get online and see that Airline #1 has an airfare $45 lower than Airline #2, guess what happens? They're not thinking about the $10 luggage fee and $4 they're going to pay for that can of coke on Airline #1. As a result, airline #1 loses the passenger and all of his revenue.

LET THEM GO OUT OF BUSINESS! IT'S OK... REALLY!

What really needs to happen is for the federal government to stop bailing out the legacy carriers with loan guarantees, tax breaks, and other subsidies. Airlines are subject to the same laws of economics as any other industry. For some reason, consumers and our leaders in Washington seem wantonly ignorant of this fact whenever a major carrier is on the verge of bankruptcy. "Pseudo regulation" ensuring that legacy carriers can stay afloat on a permanent basis has resulted in artificial long lives for many, if not all, of the major players in the industry.

People need to understand this simple fact: all the airplanes aren't going to vanish into thin air if AA, UA, CO, DL, and NW all go out of business tomorrow. The equipment and demand for air travel will all still be there. Investors will come together -- quite quickly in fact -- and create new airlines with far more efficient business models. Planes will continue to fly and the world will not come to an end. In fact, widespread bankruptcy is precisely what the airline industry has needed for a long time. Without such change, there will be very little if any innovation or improvement in the areas of service and badly needed technological upgrades.

We also need to allow foreign carriers to compete without limitations of foreign ownership in the U.S. (No, Virgin America is not majority foreign owned). Policymaker claims that doing so would put national defense at risk in time of war are flat out wrong. For one thing, we can make wartime operational compliance requisite at the time of market entry, but bottom line, if Uncle Sam needs airplanes to move troops, the French Prime minister can kiss his ass if he decides to commandeer an AF 747 or two.

The alternative, at least in terms of improving service, is very heavy regulation limiting the number of carriers and flights per route, etc. so that carriers could compete more on the basis of service than price. That is how most international routes work for now, and it's what former AA CEO Bob Crandall says should happen to the industry in the U.S. But going back to regulation would drive up fares such that most people wouldn't be able to fly nearly as often as we do today. You'd see sale fares from Dallas to New York of $900 or more round-trip, for example.