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Open Skies to Save Them

Jun
10
2008

If you think gas prices approaching five dollars a gallon are putting a pinch on your lifestyle, well, be glad you are not trying to run an airline. Only a couple years ago, did America’s air carriers return to profitability after the double-sucker-punches of 9/11 and the fear of jet-fuel – literally – SARS pandemic. Today businesses that were profitable when oil cost $60 or $70 a barrel are facing fuel costs nearly double.

The average American can respond to the rising cost of gasoline in four ways: Cut our gas consumption, cut other costs, find new revenue sources or go further into debt and hope that someday something will happen to sort everything out. That seems to be the approach being taken by America’s air carriers as well.

To conserve fuel, the airlines are flying at slower speeds and grounding inefficient planes. To cut costs, the airlines continue to reduce meals served on board and using fewer flight attendants.

In order to pick up a few extra bucks, the airlines are raising the costs of some on-board food options, and charging customers to check a bag – following a model of European low-cost carriers like EasyJet and Ryanair.

But none of these measures will save the industry if crude hits $200 a barrel, as some predict. At that point, the only option will be for the American air carriers to whip out the credit card of corporate debt until they are saved by bankruptcy or a bail out.

When Wall Street faced a credit meltdown earlire this year, a weak dollar meant that foreign cash was able to stabilize the markets. Money from sovereign wealth funds kept the financial services sector afloat amid the violent credit contraction called by the nation’s housing meltdown. For the airlines, however, such a bailout is not an option; foreign investment in American air carriers is limited to a 25 percent.

Unfortunately, it is the foreign air carriers who seem to know how to run an airline these days. Outside the United States, it feels like the golden age of flying as Singapore breaks in the new Airbus A380, Emirates introduces a new level of luxury to premium cabins and Lufthansa controls an network of national air carriers that rivals many empires.

So rather than having to bail out the airlines with taxpayer dollars – yet again – why not let foreign investors bail out our air carriers? Let’s see if the golden age of flying we see abroad can be extended to our shores!

There are a number of myths behind the limits on foreign investment: We need American carriers for national defense to transport our troops in times of war, foreign carriers do not have the same safety or security standards, American workers will lose jobs, only the most profitable routes would be flown, and so on.

Most of these arguments can be addressed either by simply looking at the realities of today’s airline industry. Safety and maintenance are already being outsourced to foreign countries. American workers already are losing their jobs and unprofitable routes are being cut. Minor adjustments to existing regulations would also address concerns.

So why not rid the airline industry of the ban on foreign investment and see what happens? Would Lufthansa add United to Swiss, Austrian and its other affiliated carriers? Would an EmirContinentalates Airline, based in Houston and Dubai become the global superpower linking the USA and the Middle East? What innovations could these successful foreign carriers bring to our failing airline industry?

Until Congress allows foreign investment in American airlines, they can pass all the passenger bills of rights they want, but it won’t improve the bottom line of American air carriers to the point that they can invest in more fuel-efficient, environmentally-friendly airplanes.

And your rights as a passenger won’t matter if your carrier one day says, “Aloha!”

Share  Posted by Scott Olin Schmidt at 2:49 PM | Permalink

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