Originally Posted by FT Letters Page
From Mr Matt Andersson.
Sir, Philip Stephens (“British Airways catches the Heathrow disease”, December 18) and respondents David Sands and Rick Medlock (Letters, December 24) point the right direction for potential airline industry solutions: regulation. However, merely auctioning off landing slots or mandating certain consumer protections as they suggest would likely prove disappointing and insufficient.
Preceding any smart regulatory action is smart policy that reflects the specific economics of the aviation industry: like energy, telecom and water, it is a natural monopoly, an industry that cannot function reliably and efficiently over the long term except in a limited competitive arrangement. This stems from aviation's unusually high fixed costs, operating intensity and other obligations, including maintenance, security and infrastructure.
Our now 30-year experiment in deregulation has provided clear evidence that the world's best airlines operate in oligopoly or duopoly environments (Australia, UAE), or consist of recent merger and partial consolidation (Air France/KLM; Lufthansa/Swiss).
But beyond a more supportive market structure is the logic of an integrated industrial arrangement. The five As (aircraft, airports, airspace, airlines, after-market) all operate as distinct, unco-ordinated entities with separate ownership, capital structures, regulation, credit strength and budgeting. Until these are synchronised, then uneven capacity, resulting from distorted signals of supply and demand coupled with isolated, unco-ordinated operations functions, will continue to define consumer air travel.
Matt Andersson,
President,
Indigo Aerospace,
Chicago, IL 60606, US
Copyright The Financial Times Limited 2007