After a decade of deregulation the U.S. airline industry is disintegrating.
In the 1980s it suffered more than 150 bankruptcies and 50 mergers. Of the handful of surviving airlines, five are liquidating major assets and three of those have fallen into bankruptcy, including Pan Am this month. Now Eastern Airlines has died after a prolonged illness.Paradoxically, while deregulation was supposed to produce more competition, it resulted in unprecedented concentration. Like savings and loans, airlines are reeling from the anarchy created by a regime of laissez faire.
Last week the crisis prompted the Department of Transportation to embrace foreign ownership as a panacea to save the collapsing airline industry from its experiment with market Darwinism.
Under present law, foreign ownership is limited to 25 percent of the voting stock of U.S. airlines, and no foreign airline can ply the domestic trade. In a radical departure from precedent and a tortuous interpretation of law, the Transportation Department proposes to allow foreign ownership of up to 50 percent of equity.
Congress should just say no.
Foreign ownership raises serious anti-competitive concerns. The international markets are already among the highest priced, fastest growing, most lucrative and least competitive.
Further, most foreign airlines are owned, in whole or part, by their governments. Monopoly is not the antithesis of competition; socialism is.
A government-owned or -subsidized airline does not have to make a profit to stay alive and therefore lacks a proper competitive discipline. Their presence in a "free market" creates an unlevel playing field.
Aviation is essential to national security, as Operation Desert Storm confirms. The Air Force simply doesn't have enough C-5As to do the job.
We maintain a federally subsidized U.S.-flag fleet of ocean carriers because of the lesson we learned in World War I - when we looked around for essential ships to ferry troops and supplies across the Atlantic, there were nearly none.
Imagine a world where we had never prohibited foreign ownership or foreign airline competition. How many Pearl Harbors would we have suffered if the dominant domestic airlines in 1940 had been Lufthansa and Japan Air Lines?
Although we fought wars against Britain in two centuries, British Airways doesn't look like much of a national security threat these days. Neither did Iran Air before the fall of the Shah.
Our alliances are constantly shifting, so that an Aeroflot looks more or less threatening depending upon the point in history at which you ask the question.
We don't want foreign owners sabotaging, disrupting or delaying commerce, communications or electric power or indeed putting their grubby hands on nuclear fuel rods.
Foreign ownership restrictions didn't cause the disintegration of our domestic airline industry. Neither did the current fuel crisis. No foreign airline is in as sorry shape as our airlines.
Surely we need to alleviate the economic crisis plaguing the airline industry and threatening healthy competition. To do that, we'd best get on with tackling its true cause - deregulation - rather than hastily grasp for radical alternatives that might endanger our national security.