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By: - 19th May 2003 at 19:09 Permalink - Edited 1st January 1970 at 01:00
NO!
The only remedy is for the US government to be reported to the WTO for anti-competitive practices.
I firmly believe in a free market system where companies live and die by their own actions. US carriers already have all this extra help with ch. 11 protection, which doesn't exist in the UK. Subsidies are just the icing on the cake. It is very unfair for an airline like BA to have to compete by itself against the US government. On a smaller scale, it is akin to the Guernsey/Aurigny situation...you all seemed to feel sory for Flybe, well it is the same as with all these US subsidies.
However, given that France and lots of other Euro countries also dish out subsidies, I don't think any action is likely unfortunately.
By: - 19th May 2003 at 19:28 Permalink - Edited 1st January 1970 at 01:00
Re: NO!
Originally posted by mongu
However, given that France and lots of other Euro countries also dish out subsidies, I don't think any action is likely unfortunately.
Could it be argued that the european governments are also subsidising many of the USA airlines through Airbus?
Don't get me wrong, I do not believe the Airbus funding to be any less legitimate than the way Boeing is funded and it is certainly a lot more transparent, but I think this is an interesting question.
Mike
By: - 19th May 2003 at 19:56 Permalink - Edited 1st January 1970 at 01:00
What do you mean - that Airbus sells aircraft at low prices or that it can afford to do so through Government subsidy?
By: - 19th May 2003 at 19:58 Permalink - Edited 1st January 1970 at 01:00
Mongu, I have no quarrel with your view on the free market at all but I just wonder if going to the WTO will rectify the situation. As Eddington pointed out this AM on the BBC, these latest BA figures do not take into account the Iraq war, SARS or the Kenya situation so these will raise their ugly financial heads in the next set of figures. I just wonder wether this worldwide situation in the airline industry is bigger than the free market can handle. If the "cradle of free enterprise", the USA, is adopting the "State Aid" route to stabilising the situation, then where is the incentive for other governments not to do the same? What you say makes sense but perhaps present circumstances dictate a different approach.
By: - 19th May 2003 at 20:05 Permalink - Edited 1st January 1970 at 01:00
On the contrary, what would be the point of an airline "competing" when it had a governmental safety net?
The US airline indsutry needs structural reform and reform is always unpleasant. It has been possible to avoid this by banking on subsidies.
By: - 19th May 2003 at 22:15 Permalink - Edited 1st January 1970 at 01:00
"Competing" is fine when everyones doing it...but as is being demonstrated in the US not everyone is today. In my opinion whats good for the US will do very nicely for all of us. I would not object to seeing state funding for airlines in certain circumstances. "Competing" is fine when the suns out but I think that things are getting too serious for the situation to be left to market forces alone. I am not advocating a return to the days of state owned flag carriers, well not yet, but until the situation ref subsidies in the US is resolved then the govt should review the situation without further delay, alot of peoples jobs and futures depend on this industry.
By: - 19th May 2003 at 23:54 Permalink - Edited 1st January 1970 at 01:00
If that had been the case, airlines like Easyjet and Ryanair would never have got off the ground. They have a history of taking on routes where BA lost money by charging the usual £300 for 45 minutes in an ATP or ERJ. Along come the LCCs and charge £50 in a 737!
Think how many jobs have been created by the LCCs.
My point is that just because a bunch of airlines are incapable of running a route profitably, doesn't mean that another airline can't come along with a different strategy and make it work.
Market forces, in the cases above, have weeded out the weak player (BA) and allowed the strong player (Easyjet) to make a profit, whilst providing extra frequency and cheaper fares.
By: - 20th May 2003 at 00:33 Permalink - Edited 1st January 1970 at 01:00
Mongu, you're the financial guru in here, in my opinion, and I always respect your views. But what the U.S. gov't does for the airlines that are based here, has absolutely no bearing whatsoever to what happens to aviation in the U.K. To each, his own. If the gov't of France wants to back Air France, great. If the gov't of Greece wants to continue to run Olympic like a bunch of morons like they have since Onassis gave it to them, great. If the gov't of the UK doesn't wish to help their own like we do here, then so be it. If UA were to go under, then another carrier in the U.S. would be allocated their slots in LHR. Now, if the U.S. gov't gave some money to say, Lufthansa, then I can see your point. But as long as we're helping out our own, quite frankly, it's none of the UK's damn business.
By: - 20th May 2003 at 01:08 Permalink - Edited 1st January 1970 at 01:00
As of itself, I agree with you GD. Indeed, the US is free to do as it pleases. Unfortunately "subsidies" are not restricted to US domestic flights, but apply to all operations.
Imagine UAL and BA are competing on the LHR-IAD route. It is just conceivable that UAL will push harder than BA, because they know that in the worst case, the US government will help them.
What are the consequences of that....the only surviving airlines will be the ones with subsidies. Service will fall, prices will rise, the airline world will be a poorer place. Your tax bill will shoot up at the same time; either taxes will be raised or the national debt will increase, which means more cash spent to service the debt, which means...more taxes to maintain the same level of spending.
History has proven time and again that government support never works in the long run.
PS - thanks for the compliments, not sure I'm a guru, but nice to be appreciated.
By: - 20th May 2003 at 01:18 Permalink - Edited 1st January 1970 at 01:00
What do you mean by "push harder?" UA and BA do compete on said route, as they do on the LHR-LAX/JFK/ORD/EWR/BOS (maybe? I think UA might have dropped that one). In every single one of those, BA operates more flights. 3 vs. 1 in LAX. A ton to 2 in JFK, not sure about the others. Either way, BA has a hell of a lot more flights from England to the U.S. than does UA, or even their esteemed colleagues, AA. So even if UA is being subsidized, as a whole, obviously, not just for their domestic or INTL services, BA is still dominating the market, really. As far as the consequences you mentioned, prices rising, service dropping, etc., I just don't see that happening even in the aforementioned scenario.
By: - 20th May 2003 at 01:26 Permalink - Edited 1st January 1970 at 01:00
Yes, that's true. I didn't consider the extra frequencies BA operate. No doubt that arose from all the slots BA have, arising from....governmental subsidy!
Maybe UAL vs. Virgin would be a more fair analogy?
By push harder, I meant tolerate a big loss in order to gain market share.
By: - 20th May 2003 at 01:34 Permalink - Edited 1st January 1970 at 01:00
Not to mention, BA serves a lot more cities in addition to the ones they compete on with UA. I guess UA vs. Virgin would be a more favorable comparison. I think Virgin does pretty damn good on their own, though. I consider them to be in a different class, from an ownership standpoint, than BA. I see what you mean by pushing harder, but I don't think that's ever the case in this market. United always had really high load factors on their LHR (Europe in particular, except maybe MXP and DUS which they dropped recently) routes and especially on their Pacific routes (before SARS). So in this case, they wouldn't have to push harder.
By: - 20th May 2003 at 03:14 Permalink - Edited 1st January 1970 at 01:00
Actually GD BA dropped the 3rd LAX flight after 9/11. But they did add a separate flight to San Diego from LHR, they still serve PHX from LGW.
By: - 20th May 2003 at 16:58 Permalink - Edited 1st January 1970 at 01:00
I still say that in this present international climate, the airlines flying long haul to potentially dangerous destinations should be entitled to short term assistance from their respective Govts. These are exceptional times for the airline industry and as such demand exceptional responses. The free market remedies will be fine for when the sun comes out again. The LoCos are lucky that, hopping around the "parish", they don't face the same dilemmas as their full service long haul brethren. Greekdude, I am not advocating that the US abolish its State subsidies for its carriers, that is an internal matter for Washington, I would just like to see the same privilages granted to our affected carriers, as I said at the start "A level playing field"
By: - 20th May 2003 at 20:33 Permalink - Edited 1st January 1970 at 01:00
Indeed, those privileges should be granted to all affected carriers. Surely you don't expect the U.S. gov't to grant said privileges? To each, his own.
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By: MSR777 - 19th May 2003 at 18:30
With the welcome news that BA has returned to profitability, Does anyone feel as I do that, bearing in mind the huge subsidies being paid out to US carriers at present, the same concessions should be made by our government to UK airlines? Especially those affected by Govt. imposed restrictions such as the situation in E. Africa at present. With apologies to fellow forum members in other countries should'nt those Govts be doing the same also? It just seems to me that there is a far from level playing field especially on the long haul scene in these troubled times. Opinions please.