Air Transport World

Slim pickings. (deregulation)

Slim Pickings Politicians are attacking decades of protectionist international rules to promote competition. A quick assessment shows that even if incumbent airlines do lose their security blankets, few genuine challengers are waiting in the wings.

The U.S. is supposed to have the most receptive atmosphere for new domestic airlines. So far, almost three dozen scheduled jet airlines, out of more than 40 startups, have failed since deregulation.

Fortunately, the U.S. experience has not totally dampened enthusiasm elsewhere. IATA assigned new designators to more than 100 carriers in 1988, 100-plus in 1989 and 43 as of last may. Airlines also stopped operating--72 in 1988, 75 in 1989 and 29 as of May--but the net is still positive.

However, net is not so important as heft. Analysis shows that those who hope to continue had better keep their checkbooks ready. That was proved in the U.S. Funding is required not just for obvious initial expenses such as airplanes, facilities and people. It must also be available, in large chunks, to change strategy if the first one fails; to have the option of buying into computerized marketing systems and for fare fights with airlines who will defend their market share at the expense of shareholders and profits.

Outside the U.S., something besides plain old money is required. Political connections, as we will see, are just as important and maybe more so. Actually, while politics is not supposed to be a significant factor in starting an airline in the U.S., it does arise. The use by Aloha and HAwaiian of political connections sealed Discovery Airways' fate as much as the charges of ethical violations and foreign ownership.

Elsewhere, politics talk much louder. Entrenched, government-backed or owned airlines have friends in the bureaucracy. Since no single country has a market as big as the U.S., most non-U.S. start-ups go after foreign routes. That means breaking up the incumbents' existing foreign-rout monopolies.

Unloading debt

As a result, incumbents and their bureaucratic defenders have made life difficult for those trying to enter the market. when governments consider selling their flag airlines, it's more to unload debt than to create competition. The governments usually retain a share, which ensures continuing protection.

Even 100% privatization, such as BA's, doesn't convince some people that protection is lessening. A long-time European observer suggests: "European civil aviation is political. A privatized British Airways is still seen as an extension of the U.K. government. Airlines are not just a means of getting from A to B for Europeans. All airlines [not just one from a citizen's own country] are seen as political things."

The European Commission is trying to stamp out that attitude. It is not coming easily. For example, the U.K. government has awarded several Europan routes to British midland Airways. But there is little space for BMA at London's two key airports, Heathrow and Gatwick. …

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