|
|
|
|
 |
BusinessWeek: January 11, 1993 |
|
|
ONLINE FEATURES
Book Reviews
BW Video
Columnists
Interactive Gallery
Newsletters
Past Covers
Philanthropy
Podcasts
Special Reports
BLOGS
Auto Beat
Bangalore Tigers
Blogspotting
Brand New Day
Byte of the Apple
Economics Unbound
Eye on Asia
Fine On Media
Green Biz
Hot Property
Investing Insights
Management IQ
NEXT: Innovation
NussbaumOnDesign
Tech Beat
Working Parents
TECHNOLOGY
J.D. Power Ratings
Product Reviews
Tech Stats
Wildstrom: Tech Maven
AUTOS
Home Page
Auto Reviews
Classic Cars
Car Care & Safety
Hybrids
INNOVATION
& DESIGN Home Page Architecture Brand Equity Auto Design Game Room SMALLBIZ Smart Answers Success Stories Today's Tip INVESTING Investing: Europe Annual Reports BW 50 S&P Picks & Pans Stock Screeners Free S&P Stock Report SCOREBOARDS Hot Growth 100 Mutual Funds Info Tech 100 S&P 500 B-SCHOOLS Undergrad Programs MBA Blogs MBA Profiles MBA Rankings Who's Hiring Grads |
|
International Business: Commentary
U.S. TO WORLD: AIRLINE DEALS HINGE ON OPEN SKIES That's not how it turned out. But does the collapse of the BA-USAir deal mean hopes for open skies are dashed? Not at all. By refusing to approve the deal for anything short of a liberalized market in Britain, the U.S. has sentan arresting mes-sage: Competition and investment in the world's biggest passenger market are welcome--but only if done in a way that gives U.S. carriers equal opportunities in foreign markets. MILD FALLOUT. The message isn't meant for the Brits alone. The U.S. is at a critical juncture with France, Germany, and Japan. Frightened by the success of tough U.S. carriers on their turf, those countries have taken protectionist positions to shelter their airlines. France renounced its bilateral treaty with the U.S. last spring. Germany and Japan also want to stifle competition by limiting capacity or flying rights of U.S. competitors. Had the U.S. allowed BA to exploit the U.S. market when U.S. carriers couldn't exploit Britain's, other countries would have seen no reason to soften their stance. Now foreigners know that if they want a piece of the U.S. market, they must accept increased competition in their countries. That's what Canada soon will have to face. Air Canada has proposed buying a 27.5% stake in Continental Airlines Inc., but a stalemate in the open-skies talks between Canada and the U.S. could hold up the investment. The U.S. can afford to negotiate patiently. Any short-term fallout from the collapse of BA-USAir should be fairly mild. USAir is shakier without BA's $750 million infusion, but the two carriers already are pursuing a revised deal that could include a smaller investment or just a marketing alliance. And Germany's Lufthansa or another carrier could well come courting USAir if a deal with BA doesn't work out. Nor will the status quo be terribly disruptive to U.S. carriers in the near term. American Airlines and United Airlines benefit, ironically, as their multimillion-dollar investments in London routes won't be diluted by new carriers flocking to an opened market. But over the longer run, failure to pry open the British and other markets would squeeze U.S. carriers, who depend on overseas growth for expansion. In two or three years, the European market should expand to a degree where U.S. airlines will need to increase capacity and offer new destinations to meet demand. They would be ill served by treaties that froze them at current levels. GROUP EFFORT. So the U.S. must begin fashioning long-term strategies for opening markets that will help its carriers compete. That calls for a coherent, across-the-board international aviation policy that sets clear guidelines for foreign-ownership limits and flying freedoms and establishes the link between the two. The U.S. talked about open skies through the 1980s, but not until last summer did the Transportation Dept. sit down to hammer out the underlying principles of such a pact. It's unlikely that Britain will serve as a catalyst for open skies, so the U.S. must look to multilateral relationships with groups of countries, such as those in the EC. That won't be easy, as each country has its own agenda. But the industry's future is clearly with globalization, involving linkups between U.S. and foreign carriers. And in such a world, bilateral agreements between one single nation and another are simply outdated. One promising approach is the State Dept.'s initiative to fashion a multilateral agreement with the seven Central American countries. Europe's nations are several years from trusting Brussels to negotiate on their behalf. In the next few years, as the airline shakeout on the Continent continues, the weaker ones will disappear and the stronger may be more willing to bargain, confident that they can survive in a more open and competitive environment. It will fall to Clinton's Transportation Secretary designate Federico Pe na and Congress to structure agreements that match developments in the commercial side of the aviation business. Such agreements could include changing the statutory limits on foreign ownership--from 25% to 49% voting shares--as a carrot. They could call for a stated policy initiative clearly linking investment to liberalization of markets. They could even hold out the possibility of opening the U.S. to foreign-airlines competition. The transition to a world of open skies is complicated and won't be tidy. The U.S. needs firm aviation policy as it enters the fray. | |
|
|
|
|
|
Copyright 1991-2009 by The McGraw-Hill Companies Inc. All rights reserved.Terms of Use | Privacy Notice |
