The Airlines Are Whining Again

It looks like the airlines are whining again. They are complaining that the war in Iraq could push into bankruptcy and possibly even liquidation. Through the Air Transport Association, they are even floating a trial balloon for nationalization.

I said it twice before, here and here, that the problem is not a war in Iraq. The problem is one of poor management. The major airlines are not in a position to deal with a war because their expenses are too high, their service is too poor and their size prevents them from having any flexibility to react to a changing world. The only war that is "killing" the airlines is a fare war.

If United or USAir files for Chapter 7 liquidation, I'll be disappointed, but not surprised. And I certainly won't be complaining that they liquidate. The airline industry is suffering from a severe case of overcapacity and the sudden removal of a large chunk of capacity might just be the shot in the arm that entire industry needs. The short-term upheaval that liquidation would cause would be more than offset in the long term by better stability in the airline industry.

Nationalization is not what the airlines need. We have essentially tried nationalization once before (we called it regulation instead, but there was no difference, other than cosmetic, between regulation and nationalization) and we proved that it does not work and is not in the best interest of the traveling public. I am amazed that the hyper-competitive airline chieftains are so willing to subjugate themselves to governmental authority. It is absolutely bizarre.

If an airline goes under, that's unfortunate. But it is not the end of the world; it is not the collapse of the US airline industry. It's not even the fault of the war. It's just the result of poor management.