Thursday, March 21, 2013

Be careful what you wish for!


I remember the heady days of the mid 1908s when Jimmy Carter deregulated the American airline industry. Henceforth anyone could fly anywhere, competition would rule the skies and air travel was suddenly open to a wide section of the population previously resigned to staying at home or going by bus. 

They were the days of Freddie Laker and People Express; of new routes popping up every day and the birth of such fine carriers as Vanguard, Air Florida and ATA seeking to fill these new and exciting voids. 

Business, however, is a rather interesting beast. While competition is lauded as the consumers’ best friend, it is a fleeting benefit. Businesses care only about their own balance sheets, and while for a period, the interests of their own seem to coincide with those of their customers, it is a relationship that never lasts for ever. As soon as they can do so, prices rise, bonuses roll in the executive suite, staff gets laid off and the hangover begins. 

Business is, to put it bluntly, a commercial form of Darwinism. Business absorb weaker businesses, usually under the guise of some illusory benefits to the customer, evermore dangerous games of industrial chicken end with commercial collapse or further consolidation (all for the consumers’ benefit, of course) and now we are left with four airlines in the USA. 

Delta, United and American along with Southwest now control the friendly skies, and it remains to be seen how long this will last before Southwest is gobbled up by one of the Big Three. 

For it is no longer an American game; United is a part of the Star Alliance, American works with OneWorld and Delta is the American partner in the Sky Team alliance. Each of these three global alliances seek to dominate huge swathes of the world, offering their clientele lounges, happy faces, “seamless connections” and piles of other advertising drivel that  will cement the global relationships that control the product offering. 

And the tourist traveller, the very poor cousin of the might corporate passenger, is left with dwindling choices. The growth of consolidation within the tourist industry, leaving a few, mainly European-based companies in control of an ever larger number of brands and thus customers will serves to only further restrict choice, although cleverly doing so under the disguise of competition. 

Do you know why Hotwire.com will offer comparisons with Hotels.com prices? Because they are both owned by the same group that also controls Trip Advisor and a number of other well-known on-line sites. Altruism? Consumer Choice? Not a chance. 

So we now see three airlines, and by extension their global partners gaining strength, and watching the brave financiers who placed massive sums of money into the industry over the past twenty years finally getting their just rewards; and these rewards will be substantial.  

Billions of dollars have been bet on the survivors in the airline industry, keeping the behemoth companies afloat in oceans of red ink. Finally the winners are being unveiled, and it is time to pay the pipers who have called the tunes; and consumers will face higher fares, higher fares, decreasing space and tighter schedules. 

There is, however, a silver lining. Buy airline shares now, (Delta, United and US Airways are good bets, as is Southwest for a slightly different fiscal dynamic) and use some of the profits that will be made to pay these additional fees. But make no mistake; it is payback time for the silent financiers of the industry. 

And Jimmy Carter must be wandering what he started. It is quite true that without deregulation millions of journeys would not have happened and the world today would look rather different from the way it does. I hope, however, that thirty years further on, we do not look back longingly at the period between 1985 and 2015 as the halcyon days of travel. 

Now, it is the time of the airline executives to examine the future that we all have, and not simply rely on the misleading drivel that their advertising companies love to put out. Will air travel remain the purview of many or return to being the privilege of the few.

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