Al Italia today is in the news again. The long discussed tie-up with Air France-KLM seems to have finally collapsed. The Chairman has resigned and the Italian government itself suggests administration is in the offing.
'Twas ever thus in the world of national airline carriers. Countries have highly unionised companies with a proud national brand. But this is not enough anymore, unless you are in the US where the government wants to throw $15 billion at you to keep you afloat.
Interestingly if you read this link, the talks failed because the Unions thought they could play at the table, when in fact Al Italia had no chips at all; the airline was less than worthless due to all its debt and loss-making operations.
Also this week we have had the introduction of Open Skies in Europe, allowing in theory much more competition between the domestic EU carriers. This is only going to lead to more Al Italia type collapses and hurt national pride. Even the US can't really support 4 major international carriers and Europe has more like 12.
Much wailing and knashing of teeth from politicians to come on this subject, perhaps even here in the UK...
BA went through much of this pain 20 years ago so I would hope that it will be well suited to the new regime. Virgin has fought against the flag carriers and been successful so also stand in good stead. The UK's relatively competitive regime might bring "our" airlines some first-mover advantage I would guess. I also see the likes of Ryanair and Easyjet coming good in this battle.
ReplyDeleteOpen slies is one thing, what we need are open airports. As long as national carrier, even when privatised, owning all the best landing slots there will be little change.
ReplyDeleteWe need these to be auctioned to get there true value and then we may see some real competition.
Does anyone still think that the airline industry would survive without massive government subsidies? How can Alitalia still be legal under EU competition rules?
ReplyDeleteEd - you would hope so but they have done such a poor job recently that I am unsure. Also as they don't get the susbsidy that other airlines do they may find it hard.
ReplyDeleteSubsidy can be quite hidden too - for example all French government employees fly air france etc.
GS - A point well made, we definitley need to go with this too. This is the point that will sink Open Skies as governments seek to protect their own airlines.
LFAT - If you go back to the end of WW2 and the era of mass aviation, all you will find is a big red mark. Airlines are not profitable!
The whole thing is bizarre. In the USA and in the EU (and heck knows where else) aeroplane manufacturers get subsidies, airports get subsidies and tax breaks, airlines (national or not) get state aid, the whole thing must be running at a massive loss, the only real income is from gift shops and car parking.
ReplyDeleteIf it was up to me I would put the airlines and airports on a level playing field: no state aid, tax on the fuel at a similar rate paid by ground transport, deregulate, enforce the competition laws, let the chips fall where they may.
ReplyDeleteEd - transport is the last major bastion of Unionisation left in the UK. So no chance of that.
ReplyDeleteMW - I quite agree, there is little in the way of profits to be made it seems. I note that even really independent operations like Virgin Atlantic make tiny margins, the likes of easyjet and ryanair can only make money flying to short haul and odd destinations. State interference has twisted the whole industy into a quite bizarre shape.
Even Ryanair and and Easyjet were subsidised - this time buy the cities they were flying to.
ReplyDeleteA link to this and other posts at
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