European airlines should think carefully about how they are going to tackle their fight for survival as they struggle to avoid Sabena's fate
Death certificates draw a clear distinction between 'cause of death' and 'immediate cause' - a long-running disease may weaken a person before a sudden infection kills them. Similarly, although Sabena finally foundered as a result of the attacks on 11 September, the deceased had been critically ill for some time, suffering from ailments such as high employment costs, increased competition and more recently an economic slowdown.
While they have grudgingly given over treasured steel, coal, defence and communications industries to the private sector, European governments have tended to hold on to their flag carriers. Even when the airline was nominally privatised, it generally remained hedged around with ownership restrictions preventing a foreign takeover, and was lovingly tended with subsidies and informal government help. This support ensured that the crash, when it came, would be more severe and more difficult to deal with.
But predictions that only three European mainstream carriers will be left in 18 months' time are too pessimistic. It is highly unlikely that 11 airlines will collapse before summer 2003. In the same way, the network of ownership restrictions and bilateral agreements will prevent cross-border mergers, and will take longer than a year and a half to untangle. The purpose of the restrictions was to prevent mergers - on the tacit assumption that the state would always be there to make good the losses of the failing carrier. As it did, for many - Air France among them - until the losses became too great and the anti-subsidy laws too severe. Now consolidation - whether by cost cutting, capacity cutting, job cutting, merger, takeover, subcontracting to other airlines or downright failure - is gathering momentum.
The pace of consolidation now depends entirely on the governments, according to British Airways chief executive Rod Eddington, who suspects that, although the European Commission is now fully behind the policy, national governments such as Switzerland and New Zealand are still exerting themselves to support their own carriers. But it would be wrong to blame the present situation entirely on the regulators. European airlines have become extraordinarily inefficient over the last 40 years, many managing the difficult trick of simultaneously overcharging their passengers and failing to make enough money for their shareholders. The ease with which the low-cost carriers undercut them, and the speed with which they have cut overheads showed that there was much to trim. And while US officials blame European governments for slowing consolidation by protecting their national airlines, the US airlines themselves have often opposed alliances such as American Airlines/BA which would threaten their own narrow interests.
Competition has always been difficult - entry costs to the airline industry are high. Pilots have always been in short supply, due to their lengthy and expensive training, and until recently cuts in air forces after the end of the Cold War were pushing down the numbers of ex-military pilots further. This gave aircrew unions considerable bargaining power, which they used to impose restrictive scope clauses and seniority regulations. And, like other state-owned or protected industries, airlines were shielded from the cost-cutting pressures of the market. They now have the motivation to learn from the low-cost sector and other industries forced to become more efficient. This is not to encourage them to cut thousands more jobs - this would ruin morale and runs the risk oflosing essential know-how.
Nor should they follow the strategy of making profits by neglecting safety. Some airlines admit they put more hours on their airframes in less time than other airlines; their pilots are worked up to the legal maximum flying hours; and they have cut cabin crew to the absolute minimum. With the emphasis on safety and security now stronger than ever, this is a bad idea, commercially if not practically.
Astronaut John Glenn is supposed to have said that, while waiting for launch, he would remember that he was sitting on top of an enormous quantity of explosive fuel, controlled by half a million safety-critical components - each one supplied by the cheapest bidder.
Such an approach to airline security may have cost thousands of lives on 11 September. There is room for more efficiency everywhere, but cutting staff is not always the best way to achieve it. Everyone with an interest in the industry, from governments to the boardroom to the flight line, should bear this in mind.
Source: Flight International