Businessweek Archives

The Surest Route To More Competitive Skies


Editorials

THE SUREST ROUTE TO MORE COMPETITIVE SKIES

The great Mae West, who declined to fly, used to say, "I don't like airplanes. They fall down." It turns out that airlines fall down, too. Eastern, Continental, and Pan Am are in bankruptcy. TWA is scrambling to escape a similar fate. The U. S. airline industry is in deep trouble (page 56). It staggered through 1990, posting a record $1.5 billion loss, and the prospects for 1991 are equally bleak. Of the nine major domestic airlines, only American, United, Delta, Northwest, and USAir are healthy.

The bleeding stems from the brutal fare wars initiated by the weaker carriers to stimulate cash flow. The deep discounts on some heavily traveled routes have been a boon for passengers but a body blow to the airlines' bottom lines. The spike in fuel prices caused by the Middle East crisis and the slumping economy only aggravated the hemorrhaging.

Some experts believe that the precarious finances of certain carriers will lead to a further consolidation of the industry. That would mean less competition and higher fares. It's hardly what deregulation was intended to accomplish.

Faced with an oligopoly in the air, Congress would have to ask itself whether it wasn't time to consider reregulating. But instead of taking that step, the government should encourage the trend toward globalization that has already started. One way to do that would be to liberalize the rules limiting foreign ownership of U. S. airline equity, as Transportation Secretary Samuel K. Skinner is considering. Another would be to award foreign carriers more U. S. landing rights provided the applying owner-state removes corresponding barriers. If foreign carriers were allowed to serve more U. S. cities, that could help to keep fares in check, while opening up the possibility for U. S. carriers to launch profitable new routes serving other countries. Such a new global industry would allow us to attain competitiveness while flying over the bureaucratic miasma of reregulation.


Toyota's Hydrogen Man
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus