How to Make the Skies a Little Friendlier : Unsuccessful British Air effort underscores larger problem
British Airways’ recent decision to pull the plug for now on its plan to invest $750 million in financially shaky USAir of Pittsburgh puts the problems of the U.S. airline industry into sharp new focus. Driven into the red by the recession, air fare wars and too many seats chasing too few customers, the nation’s airlines are hungry for new partners and markets, especially on lucrative international routes.
A big problem, however, is that U.S. carriers have to operate under outdated, restrictive international aviation agreements that can only be rectified by foreign governments often reluctant to accept huge changes in the global aviation market. The British Airways-USAir deal collapsed because of the failure of British and U.S. authorities to agree on an “open skies” policy.
Liberalization of Britain’s restrictive air agreement was sought by U.S. authorities in exchange for approving the British Airways deal, which would have given a foreign carrier unprecedented access to American routes.
The big U.S. carriers--American, United and Delta--fought fiercely against any deal that failed to allow them unlimited flights from U.S. cities to all British airports. When increased access was not offered, outgoing U.S. Transportation Secretary Andrew H. Card Jr. indicated he would reject the deal. British Airways then withdrew its proposal to acquire a 44% stake in USAir. The nation’s fifth-largest airline badly needs the infusion of cash, so the deal’s collapse is doubly unfortunate: It is a blow to both USAir employees and American consumers.
The two airlines have said they would attempt to come up with an alternative deal next year. That’s worth trying.
For its part, the Clinton Adminstration will need to undertake a total review of international route agreements. Federico Pena, President-elect Clinton’s choice to become secretary of transportation, should have as his aim the modernization of global aviation policy, now governed by antiquated post-war market-sharing agreements negotiated when there were far fewer international carriers and long-range jets. Those accords consist largely of restrictive, bilateral agreement among governments.
The Bush Administration’s approach was to take up market liberalization country by country. It worked with the Netherlands, which was willing to open its market so that KLM could strike a deal with Northwest Airlines. But the strategy failed with the British. Had the British agreed to an open skies policies, it would have set a fine precedent for liberalization that the United States is seeking in new air service agreements with Japan, France and Germany. Right now, in fact, the European Community plans to launch a deregulation program allowing, among other things, open skies for carriers of member nations. Why not expand that practice worldwide?
With the increasing interdependency of the global economy and markets, air travel is a precious international resource. Alternatives to outdated, restricted airline agreements are badly needed. Clinton’s man Pena needs to lead the way.
