Seeking friendlier skies

January 19, 1993

The airline industry is in turmoil, but the path to economi security is clear -- if the industry's leaders will just see the way. Many do, but their competitive instincts impair their vision.

The latest evidence is United Airlines' announcement it will cut $400 million a year by laying off 2,800 employees, cutting service and reducing its fleet. This follows similar moves by most other domestic airlines and the fervent search for infusions of capital.

Stephen M. Wolf, United's chairman, urged President-elect Clinton to name a commission to study the industry's troubles. Revenues at the airlines have plunged during the recession as passenger traffic has declined sharply. An improving economy will bring most surviving airlines back. But the three major airlines, American, United and Delta, have suffered from fare wars initiated by competitors. Ordinarily that would be one of the risks of free enterprise, but much of the fare-cutting was started by bankrupt airlines sheltered by the courts.

Mr. Wolf also points to foreign competition that blocks U.S. airlines from access to profitable overseas routes. He has a point, though it can be carried too far. United and the two other domestic giants have 69 percent of the trans-Atlantic market; they serve the cities 94 percent of U.S. passengers want. What they lack is unlimited access to lucrative foreign airports, like London's Heathrow.

That was the principal factor in the big three's successful opposition to a virtual merger between USAir and British Airways, a joining of considerable important to Baltimore-Washington International Airport. But others in the industry are bringing off their own deals.

Northwest Airlines won Justice Department approval recently to operate as a single carrier with KLM. Earlier, Justice officials had approved a big investment in Continental Airlines by Air Canada. Even American Airlines, which led the fight against USAir-British Airways, is virtually taking over Canadian Airlines International. Boeing, the dominant aircraft builder, is talking with some of its most bitter European rivals about jointly building a super jumbo jet.

The message is clear: International amalgamation -- though not the strangulation of competitors the U.S. big three would like to see -- is vital to the health of the airline industry. If Mr. Clinton can nudge the airlines along that path, United and the others will again fly in friendly skies.

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