US airlines cannot keep using 11 September as an excuse for their poor performance. But are politicians brave enough to realise?
With less than a month to the anniversary of the terror attacks on the USA, the first US major airline has filed for bankruptcy protection, a second was last week threatening to follow and a third has declared another round of job cuts, aircraft retirements and delivery deferrals. Boeing, General Electric and other suppliers are talking about additional redundancies as they push back any expectation for an air transport recovery to 2004. Soon the politicians will return from their summer break, and things will get really dicey.
After a week of bad news - US Airways' Chapter 11 filing, United Airlines' bankruptcy threat and American Airlines' cuts - no one can be left with the illusion things are going to get better soon. The danger, as 11 September approaches, is that people will believe the events of that fateful morning are entirely to blame for the condition airlines now find themselves in. The danger is politicians will be motivated to step in to save jobs in an industry that would be best left to sort itself out.
That is a harsh judgement, and one that certainly oversimplifies the complex mix of factors that has brought air transport to its present situation. But it is worth remembering one fact: if we were to turn the clock back to midnight on 10 September 2001, and picked the airlines least likely to weather the cyclical downturn that was by then already under way, it would be the likes of US Airways and United. And we would pick them for one reason - unsustainably high costs.
Chapter 11 has been used time and again as a refuge for airlines whose costs have spiralled out of control. Chapter 11 has been used as a threat to bring labour unions to the negotiating table; a lever to extract concessions from the workforce; a guillotine to sever unwanted obligations. Occasionally Chapter 11 has been used to engineer a spectacular renaissance; more often it has been used to postpone a painful inevitability, like a brain-dead patient on life support.
Things will be no different this time round, and possibly worse. This time airlines have someone other than themselves to blame, whether it be al-Qaeda terrorists, Enron accountants or Transportation Security Administration officials. This time they can exploit the edgy post-11 September environment to bring politics to bear on their plight. Already there is talk of the Air Transportation Stabilization Board (ATSB) being pressured to reverse its rejection of United's application for a $1.8 billion federal loan guarantee, despite its $2 billion cash reserves, while it is free to turn down bids from struggling lost-cost carriers.
The belief is that United is too big to let fail. Tell that to the citizens of Belgium or Switzerland, who watched as their flag carriers were allowed to disappear, in a European business environment that has proved far tougher for airlines that the region's reputation for social responsibility and political feather-bedding would suggest. Other big names may yet follow Swissair and Sabena into the history books, which is where some airlines belong.
But that is unlikely to happen in the USA. Vanguard may go, and National and Midway, but not household brands like US Airways and United. Chapter 11, the ATSB and the voting power of jobs will see to that.
And what of the industry that supplies these same airlines? Will the threat of another round of jobs cuts at Boeing provoke politicians into crafting another thinly-disguised rescue package like last year's plan to lease 100 767-based air-refuelling tankers? The US forces are clearly short of tanker capacity, as the recent action in Afghanistan has underlined. But is the lease of KC-767s at $10 million a year per aircraft the right solution?
If politicians want to support the US aerospace industry in its time of need they should listen to the industry as a whole, and not just its loudest voice. Despite the skyrocketing defence budget there is a procurement train crash coming, and hastily-conceived rescue packages will only make it worse. The questions that need to be asked include: is a 767 tanker order what Boeing needs? Is theKC-767 the right aircraft? Is a lease the right solution? Could the private sector provide this service?
The war on terror - vital as it is - must not be an excuse for short-term expediency in place of hard decisions on the US economy or its long-term defence requirements. Failing airlines cannot cloak their inefficiencies in the Stars and Stripes and an appeal to support the status quo. The collapse of a big-name airline is not a victory for the terrorists. It's the inevitable result of failing to keep costs under control.
Source: Flight International
