April 22, 2008
Sunday's edition of The Chicago Tribune ran a comprehensive piece on recent shakeups in the U.S. airline industry and its potential impact on prices. Entitled, "Is This the End for Cheap Airline Fares?," the article sounds the usual tocsins that mergers (e.g., Delta/Northwest) mean less competition which will inevitably lead to hikes in ticket prices. To its great credit, the piece also extended its analysis to the realities of exorbitant fuel prices and the senselessly cheap rates which came about as a result of the low-cost carrier boom-rates that few, if any, airlines can afford to sustain in today's economic environment. This is good to keep in focus, especially during a time where the media appears saturated with apocalyptic pronouncements concerning U.S. aviation and the doomed place of the
consumer. This unfortunate reality is no doubt why Richard Anderson and Doug Steenland, CEOs of Delta Air Lines and Northwest Airlines, felt compelled to rebuke six myths concerning airline mergers in the pages of The Wall Street Journal last week.
Obviously, it is nothing new to see sensationalist reporting overtaking critical analysis, due reflection, and the publication of reliable, cogently reasoned, results. The latter, of course, takes time; the former rides a wave of understandable public concern, amplifying it back tenfold so that the final result is the perception of an industry animated by unbridled greed and mindless inefficiency. That these two characteristics are, in fact, contradictory is passed by on the rush to pound another nail in the
casket of aviation's public image.
There are two very damaging, intertwined, prospects which may well appear in reality should this media-fueled tarring n' feathering of the airline industry continue. The first is that the public eye will be further diverted from the issue of foreign investment restrictions-restrictionswhich are arguably crippling the U.S. airline industry by not allowing it to find new sources of investment capital. The second is that a new movement to reregulate the airline industry will be encouraged despite the fact that one of the last vestiges of economic regulation-strict caps on foreign investment and control-lies at the heart of current airline woes. Without the removal of these restrictions, U.S. airlines will still be constrained in the route options they offer to customers and, therefore, less likely to find themselves in a position to offer reduced air fares. Further, without foreign carriers having the option to compete in the U.S. market, choices for consumers will remain limited-perhaps increasingly so given the rising number of airline collapses. It would be a dark irony indeed if the outcry against increasing airline prices, reduced routes, and sub-par service overshadowed the very thing which above all else could rectify them.
April 22, 2008 | Permalink
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