Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, January 17, 1993 TAG: 9301180341
SECTION: EDITORIAL PAGE: C-3 EDITION: METRO
SOURCE: MATTHEW H. NASH
DATELINE: LENGTH: Long
HOW THE BIG 3 TORPEDOED USAIR
THE RECENT withdrawal of British Airways from a proposed alliance with Arlington-based USAir was a disappointment to some and a victory of sorts to others. After months of so-called careful deliberation, Secretary of Transportation Andrew Card held a press conference to characterize the proposal as giving a foreign airline unfair advantages in the U.S. market.Funny how Card makes decisions easily, once matters are taken out of his hands. Makes good political sense, too. Card went on to say that he had no doubt USAir would be able to successfully compete without a foreign partnership - this after he and the Bush administration repeatedly denied USAir choice overseas routes in favor of other, larger airlines.
The British Airways proposal adhered strictly to international trade laws. But America's three largest airlines - American, Delta and United - cried foul when they envisioned the specter of a fourth large airline as a global competitor.
So great was their fear that they led a panicked and massive lobbying blitz on Capitol Hill in an attempt, apparently successful, to sabotage the deal before too much public notice was drawn to it. They fibbed shamelessly to the media and even to their own employees - at times calling the proposal a "merger" and at others a "takeover," even though it had been exhaustively explained that British Airways' investment would have just bought 44 percent of USAir's common stock and less than 25 percent of the preferred.
The furor caused such an uproar that by the end of the presidential campaign, it was being touted by both Ross Perot and Bill Clinton as another example of how evil foreign investors are usurping American industry while we sleep.
Sadly, America has been asleep since the Civil Aeronautics Board was dissolved in 1978, effectively deregulating the airlines. This action was supposed to nurture competition, but instead has allowed anyone with venture capital to be in the airline business.
Typically, the new companies realize too late that the larger, established airlines own far too many facilities - and "slots" (landing rights) into big airports - for the new companies to compete successfully. These companies then slash ticket prices in an attempt to gain market share; the other airlines follow suit; a costly fare war ensues.
Up until now, the deeper-pocketed, established airlines have prevailed as the dubious victors of these numerous fare skirmishes, and the weaker airlines ultimately have declared bankruptcy or become insolvent.
But it doesn't end there. Instead, those lucky enough to remain in bankruptcy now find themselves free of immediate debt responsibility and able to begin a fresh round of fare wars. From there, the entire industry reels toward financial ruin.
For the ticket buyer, it is a wonderful thing: a constant fire sale of destinations and airline seats sold at Greyhound prices. For the airlines, it is a blueprint for destruction and chaos.
Second-generation ticket-buyers have come to expect such pricing as the norm; few understand that it takes far more money to move an airliner than a bus. The takeoff roll and initial climb alone of even the most modest airliner burns the same amount of fuel it would take a diesel bus to go from Roanoke to Greensboro.
It is terrifying to hear people like former Transportation Secretary Samuel Skinner make moronic statements that praise airline deregulation as an unparalleled success (meaning, by original definition, more competition), when companies such as Pan American, Eastern and Braniff no longer exist. Piedmont, Western, Midway, Altair, Ozark, Southern, Frontier and Empire are now either liquidated or merged with larger corporations.
As the number of airlines decreases, thereby eliminating competition, the horizon indeed looks bleak for the consumer. The Big Three are poised to own the skies with no rival but each other.
Early in 1992, Robert Crandall, chief executive officer of American Airlines, put forth what he assumed would be a killing blow to those last few straggler airlines (that is, Continental, TWA, Northwest and USAir) when he unveiled a "new" system of air fares.
Crandall's scheme backfired when the stragglers somehow survived. The apoplectic Crandall vehemently denied accusations of predatory pricing, but his brainchild died a very quiet death.
It is no wonder that Crandall is the most outspoken of the Big Three's CEOs on the subject of airline globalization, and the largest source of propaganda and misinformation concerning the ill-fated British Airways-USAir proposal.
At the behest of their employers, American, United and Delta employees inundated their congressmen with letters against the proposed alliance, being told ominously that their very livelihoods depended on it - meaning, one would assume, that should the deal have gone through, their respective airlines would have immediately caved in.
This would be laughable except that some very important ears in Washington apparently heard these hysterical tirades. All three airlines chanted the litany of equal access to British skies as the reason for their woe. But when put together, they would still have enjoyed more access than the proposed British Airways-USAir alliance. (Delta reaps the lion's share for Europe in general, and United runs a close second with its choice Heathrow hub.)
Crandall says he would have no problem with an alliance if all restrictions were dropped concerning the number of flights a U.S. carrier could schedule to and from the United Kingdom. He and his cohorts were at least partly successful by ramrodding the proposal into the U.S.-U.K. bilaterals, thus creating the political football that nobody wanted to touch.
Crandall's philosophy is at most dangerous and at least ridiculous. Unfortunately, he has confused the issue by implying that the proposal was about "control" of an American corporation and routes, when it was in fact about size and market share. Neither the British nor the American carrier would have suddenly enjoyed more access to the other's country.
Further confusing were inflammatory statements by the Big Three, with their absurd notion that a 44-percent investment by a foreign company into an American corporation suddenly makes it a behemoth multinational interloper bent on stealing American jobs.
British Airways is Europe's leading Boeing utilizer, and both British Airways and USAir have firm orders with the manufacturer though the middle of the decade. It seems this would only tend to create stability in America's domestic economy - not to mention job security for USAir's more than 47,000 employees.
Ironically, Northwest Airlines recently signed a similar deal with the Dutch airline, KLM, and hardly a voice was raised in protest. The Netherlands is not exactly a hot commodity as far as the Big Three are concerned, so there was apparently no need to manufacture any political apparatus to block the deal. Meanwhile, Air Canada seeks a similar U.S. mate and has already spoken to Continental and Delta.
So why the big fuss over the British Airways-USAir deal? Put simply, this particular alliance would have created a fourth, very large player in the global market.
British Airways has of late been a very successful and dynamic airline. USAir, while not particularly successful of late (who has been?), is also very dynamic and strategically positioned to provide the traveling public with a form of seamless overseas service as yet unseen in modern air travel.
This no doubt was a serious infringement on the clubbish conception that the Big Three had envisioned when it would come time to divide up the world.
Transportation Secretary Card hemmed and hawed, sniffed the winds of politics and, in the timeless manner of all politicians, made what he deemed a politically correct statement after events had eclipsed any need for it.
The Big Three would like us to believe that the traveling world at large is best left in their hands, and if any deals are to be made, they should be the ones to reap any benefit - not some second-tier airline.
To the average air traveler, whether British Airways and USAir can hammer out a revised proposal more to the Department of Transportation's liking matters little. Undoubtedly we will see what sort of political animal President-elect Clinton's secretary of transportation is.
One thing however, is certain: The competition dwindles yearly at an alarming rate, and the $100 round trip to any destination will soon be a thing of the past.
Matthew H. Nash of Blue Ridge is a USAir pilot.