| By: Geoff Dixon |
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Most governments still take aviation for granted. They over-regulate the industry, lag on associated infrastructure investment, load up the external charges, permit airports to extract monopoly rents and show little leadership on the essential agendas of open skies, biofuel development and 21st-century air traffic management.
If this complacent attitude continues, it is not only aviation that will suffer: governments themselves will pay the price and taxpayers will punish them for it.
Two events in recent years highlight both the economic significance of aviation and the reality that some industries and individual businesses are too important to be allowed to fail.
In April 2010, the ash cloud emanating from a volcano in Iceland shut down aviation in northern Europe for days, causing widespread economic damage. Even with alternative transport options available, business as usual - or even close to usual - was impossible. This was a powerful reminder of the strategic economic importance of aviation to the global economy. Aviation matters.
In September 2008, the US government stepped in to calm a tide of global economic panic with a $700 billion bailout of the nation's financial institutions. The "Troubled Asset Relief Program" was set up because there were some institutions - such as Merrill Lynch - that were too big and too important to the well-being of the economy, to be allowed to fail. This massive bailout was followed by yet more taxpayer support.
LIFE BLOOD
Airlines are not banks, but they are analogous. Like banks, they are part of the lifeblood of economy activity and they are dependent on government regulation, both national and international.
In some circumstances they are even more than this. Qantas, for example, has been part of Australian national life for 90 years. Serving an island continent, Qantas retains a national strategic significance as the key transport link between Australia and the rest of the world and the backbone of domestic travel for business and leisure. It would be unthinkable for Qantas to fail. And since its privatisation in 1995, Qantas has succeeded in making an annual profit, serving the interests of its shareholders and customers, but also serving the national interest.
Yet the cost pressures continue to grow in an industry that already, financially, relegates airlines to the bottom of the aviation food chain. So governments must get out of the habit of loading up costs, charges and complexities on airlines.
They must work with the industry to build maximum efficiency, both landside and airside, through everything from sensible security processes to modern air-traffic management. They need to confront the inevitable tendencies of airports to maximise their own interests at the expense of airline viability. And they need to ramp up their support for biofuel research and development, to ensure the future of aviation.
This must be done because aviation is not an industry that can be taken for granted, and the survival of the essential participants cannot be guaranteed.
| COVER STORY: OCTOBER 2007
| FROM THE ARCHIVES I don't think the industry is as vulnerable as it was, say, 10 years ago. The late 1990s were very difficult and there was a lack of discipline. But since we had all those shocks early in the new century, almost every airline has taken a lot of costs out, and that is different. |
Source: Airline Business
