The Airline Industry

I'm not an expert on the airline industry, but then by his own admission, neither is Nicholas Calio, President and Chief Executive Officer, Air Transport Association. Listening to his speech today, I was struck by a couple of things. First, he noted that the airlines have not been making money for a very long time. He pointed to, among other things, over burdensome regulation as one of the causes but, despite his plea for a dispassionate analysis, didn't comment on the obvious issue of the difficulty of tacit price coordination in high fixed costs industries. This of course is a predictable consequence of deregulation, which was intended to increase competition and drive down prices (which it did). That, I thought, was what the free market was all about?

The other comment I was struck by was his observation that some countries view air transport as "strategic". However, he didn't mention that those countries generally have state owned or state supported operators. He also called for a "public-private" partnership which sounds good until you realize that wants wants is for tax payers to fund capital investment in the companies he represents. Looks to me rather like privatizing the gains and socializing the losses. Of course if gains were to be shared, for example by equity investment by the government, there would be cries of "government takeovers of the airlines" from the tea party loonies. But there are those, and I suspect Nicholas Calio is one, who are happy to sup from the public trough but want to be free for oversight, accountability, or sharing the gains with taxpayer who have assumed the risk the private sector and its investors were not prepared to make.

Are we there yet?

"In today's politics, the pressures are so intense, the criticism so brutal, the targeting so arbitrary, that we are in serious danger of creating a situation where 'normal' people feel inclined to walk away, leaving the manically ambitious and the weird in their stead". Tony Blair, A Journey: My Political Life, Knopf, New York 2010 p487

Photo: GETTY

Perhaps we've been there a decade already? I'm not saying, just asking...