Friendlier skies for the airlines

September 10, 1993

U.S. airlines are emerging from a period of exceptional financial turbulence, only to enter one of philosophical turbulence. After three years of staggering financial losses, the major airlines are either starting to turn a profit again or at least to sharply reduce the red ink. Now comes a spate of recommendations to restore this vital industry's health and to ensure that its recent troubles don't recur.

Most prominent -- but not necessarily the most far-seeing -- recommendations are in the report of a federal commission charged with strengthening U.S. airlines. Much of what it is tentatively proposing is predictable: exemption from the proposed fuel tax, rollbacks in some recently imposed tax increases, reductions the industry's contribution to the Federal Aviation Administration, easing of regulatory measures and strengthening of the air traffic control system.

A return to the heavy regulation that prevailed before 1978 was rejected, though some airlines clearly would welcome federal intervention in some aspects of their business, like fare wars. However, the commission's report makes it clear many of the industry's problems are its own fault, caused by bad management decisions during the '80s. Most of its whopping losses in the past three years are traceable to factors that are unlikely to recur. The commission even suggests creation of an advisory board to help avert future industry mistakes.

Even without this commission, there are pressures for change within the industry. The low-cost, no-frills challenge of Southwest Airlines is forcing traditional industry leaders to rethink their strategies. In an industry once characterized by bitter labor-management relations, several airlines are giving their employee unions a share of ownership in return for wage and work-rule concessions. Other airlines are looking abroad for the additional capital they desperately need through quasi-mergers, like USAir's recent deal with British Airways, which the commission would encourage.

Intentionally or not, the commission's report constitutes a good argument for not rushing into such areas as tax relief. The airlines seem to be finding their way back to the profitability that is essential to their health. Other proposals deserve prompt attention, such as taking the air traffic control system away from the FAA, which seems unable to modernize it efficiently. The federal commission properly sought a balance between essential support for a critical industry and meddling too much, either by stifling it with unnecessary regulation or by artificially propping up weaklings that can't do the job.

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