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Government Subsidies Keep Air France Flying High


Since when is a business kept afloat by its own government hailed as a "global champ" ("Vive L'Air France," European Business, Sept. 9)? By subsidizing Air France, the French government effectively distorted competition and manipulated the market to the detriment of Air France's European rivals, such as British Airways PLC and Lufthansa, which did not receive any such aid from their governments.

It would be interesting to see what would happen to Air France's liquidity if it were ordered to return those payments. Just as the European Commission recently ordered Deutsche Post to repay around $550 million it received from the German government, why shouldn't the EC order Air France to repay the $5 billion?

You also point out that the "French government has been slow to approve airport slots for low-cost carriers." Is this such a surprise? As the main shareholder in the airline, why should it open its airports to low-cost carriers that will obviously eat away at Air France's business?

Daniel Mifsud

Lija, Malta As I was reading "A different yardstick for cable" (The Corporation, Sept. 2, North American edition), I realized that earnings before interest, taxes, depreciation, and amortization (EBITDA) seems not to be the best measure for any company. In order to overcome hidden expenses, companies should be measured by free cash flows.

Some people say it is too complicated to do this measurement, but it is quite easy: Just take EBITDA, less capital expenditures, taxes, interest expenses, and changes in net working capital (without cash), and add new loans. That's it. Now, you can really see if a company is doing well or not. This simple formula can catch any hidden expenses or liabilities.

Juan Carlos Pardo

Mexico City

EBITDA isn't just too lenient, it's a smoke screen. And the backlash against it is hardly "a fad." It's a cri de coeur from investors against the culture of corporate chicanery that surely goes beyond the Enrons and WorldComs that have been found out. If investors like me are to return to the market with any measure of confidence, I would accept no alternative (and I haven't recently met anyone who will) to the one transparent reporting format that we know so well: turnover less costs less depreciation less interest equals profit before tax. And a pox on the scoundrels who seek to reinvent that wheel!

Stanley Pinto

Muscat, Oman The new Public Company Accounting Oversight Board (PCAOB) needs more than a reputable personality as its chair ("Will Pitt pick an accounting watchdog who can bite?" Washington Outlook, Sept. 2). It needs a new monitoring system that upgrades the traditional accounting postulate of debit (value received) and credit (value given).

A new computing-age accounting algorithm processes more complete information. In the debit column, it identifies the kind of good received and in the credit column the kind of good given, as well as the stakeholder roles of receiver and giver, respectively. Know the value and the kind of goods exchanged, know the receivers and the givers on the scene, and the corporation becomes a live balance sheet that can be monitored all the time by the CEO as well as by the PCAOB. Thus, Corporate America becomes transparent, and the American economy will come back!

Milan Juranovic

AMCRO International Consultants

Optija, Croatia Contrary to "The secret of Switzerland's success" (Readers Report, Sept. 2, regarding "Trouble in paradise," European Business, July 29), the qualifications to become a Swiss voter are quite easy. All Swiss nationals have the right to vote on municipal, cantonal, and federal issues. In some municipalities and cantons, even foreigners have a right to vote. Foreigners staying for a certain number of years in the country have no difficulty in obtaining the Swiss nationality.

Marc Winiger

Cologny, Switzerland


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