Re-nationalisation MUST be an option.

[WAIF-er]

How on gods earth are airlines gonna get out of this deep hole? EU competition laws? They surely cannot apply "no matter what".

Look at Railtrack for example. When an industry is in dire straits, government intervention needs to take place. Otherwise, when the industry comes out of the hole, there will be no airlines left, hundreds of disused slots, thousands of frustrated passengers and just a few no frills 737's - which is fine if you want to go to Nice or Malaga!

Seriously, we cannot leave the industry to the perils of the free market - a pure market economy just doesnt work in reality.

Having just read about Canada 3000, I am almost in disbelief at the whole state of things!

[411A]

Cannot disagree more....those airlines that are (or were) state owned usually offered VERY poor service and were top-heavy with grossly overpaid senior management.
The free market...the ONLY way to fly.

[wooof]

WAIF-er,

Please tell us you're on a wind up. :eek:

[The Guvnor]

The big collapses - SN and SR - have been state enterprises! You have got to be kidding when you say that nationalisation is an option!

As for Railtrack, the more that comes out, the more that it appears that Stephen Byer's actions were highly suspect to say the least...

[tilii]

Poor old WAIF-er. Someone must leap to his defence. Might as well be me.

WAIF-er is right. With the exception of 411A's remarks, the rest of you above are also right to some degree. What is overlooked here is the undeniable fact that state enterprises delivered a SERVICE that free enterprise (for want of a better phrase) would not, or could not.

By way of mere example, Sabena flew to Conakry (Guinea). Who else would do that (well, other than to rip diamonds off the Guinean Government)?

And what about the taxpayer's righteous expectation that some of its pennies must be spent on providing reliable transportation services?

Let's face it, it is unlikely that the modern aircraft would ever have been developed were it not for state enterprise (and war, of course).

Come on chaps/chapesses, there is surely a place for both state and free enterprise in our world. That is not to say that hopelessly inefficient state enterprise should be endlessly supported by gratuitous handout.

[The Guvnor]

tilii - Air France has as good as - if not a better - African network as SN did; especially to Francophone countries.

Having run a regional operation in Central Africa operating out of BJM to such fun places as KGL, EBB, GOM, BUX, BEN and TQX the problem is always going to be how many pax you can get on these services. Our pax were primarily NGO employees and diplomats - and the load factors in our Let 410s averaged around 70% which wasn't too bad.

Air Burundi was our state owned competitor, and through corruption and general inefficiency they managed to operate their sole B1900 probably 50% of the time at best. The Air Burundi pilots were very badly paid at around US$200 per month; most flew for us on the side! :D :D :D

Elsewhere in Africa, you have Air Afrique which has long been a bigger basket case than SN and has recently been rescued (yet again) by the long suffering French taxpayer who also pays for the very extensive French military presence in most of the Francophone nations - keeping despotic governments in power.

Air Gabon recently acquired a B747-400 which seems a tad excessive for a country where the average salary is under $500 per month - but which thanks to a sea of oil controlled by ElfTotalFina is one of the richer nations in that benighted continent. Regrettably, the majority of that income appears to find its way into the accounts of President Omar Bongo and his family rather than benefitting the populace.

Then you have that other paragon of virtue and efficiency, Nigeria Airways. If you think that carriers like Ansett and SN were overstaffed, try this for size: in the early 1990s, WT had a couple of 737s flyable plus (I think) an A310. Total staffing for those three aircraft was over 15,000. (Boss Raptor can correct this if necessary - he's considerably more conversant with them than I)

Whilst there may well be a case for state enterprise in developing nations - and there is - I do not think that this should apply in developed ones.

[tilii]

The Guvnor

Hmmm ... interesting. I would probably enjoy a long chat with you on the subject of African aviation. However, I am of the very firm opinion that state airline enterprise is essential, even in the so-called 'developed' nations.

Let me put a possible scenario to you. What if things were so bad in aviation that all the free enterprisers decided to pull out (such a scenario, though unlikely, is surely possible)? Do you think we should all make do with absolutely no air services as a result. I would argue for a world where state and free enterprise work alongside each other, if for no other reason than to each keep the other honest. ;)

[foghorn]

There is one simple reason why state-owned enterprises do not work: political meddling.

At best, this means that the politicians use their shareholding to manipulate things for their own political ends - which basically means either vote buying to stay in power, or nation-statism and neocolonialism. As the Guv points, the French are bad offenders with this in francophone Africa.

At worst, this can mean a company is run mainly for vested interests (re. developing country cronyism) or as an extension of the welfare state (re. seventies Britain and much of continental Europe today).

Such meddling almost always goes against the standard business practice of maximising profit for shareholders by proving customers with superior goods or services as cheaply as possible.

WAIF-er I'm not getting at you, but you do have some rather interesting views on how to run a business re your comments on this thread in wannabes for example Cabair upbeat despite current climate (http://www.pprune.org/cgibin/ultimatebb.cgi?ubb=get_topic&f=2&t=011460)

foggy.

[ 10 November 2001: Message edited by: foghorn ]

[WAIF-er]

Maybe I should have spent more time arguing my case, but it was late and I wanted to gauge some initial opinions.

Private enterprises exist in order to make money for themselves and their shareholders. Customers come second. Just look at bus deregulation: marginal and non-profitable services just get the chop, with complete disregard for the travelling public.

A Public Private Partnership doesnt mean a return to the days of old. Governments admit that things were run poorly and inefficiently in the past and this would surely be addressed in any future operations.

Governments are far more accountable to the public nowadays and it would be in their interests to run a tidy ship or else come election day...

I cant help but comment on a couple of comments above from our US buddies. my only reply to that is; you completely dismiss government intervention, yet the US majors are getting HUGE handouts from capital hill! Come on!

[foghorn]

WAIF-er,

The Railtrack comparison you give is a poor one because the model on which the rail privatisation was based is totally flawed (because it was rushed for political reasons). Railtrack is not properly subject to market forces, and yet is not sufficiently regulated to protect consumers. There is also a dangerous fragmentation of safety control. The huge cost of entry into the market of providing rail infrastructure means that Railtrack will always be a near-total monopoly. Therefore the government has taken steps to change things, and a major change was necessary. The jury is still out on whether they have taken the correct steps (and I'm very sceptical on that).

Airlines are a different thing. It is not that difficult these days to start a commercial airline to fly between A and B - look at all the low cost carriers that have started in the British Isles in the last decade or so. This will get even easier if various governments can sort open-skies issues out in a fair way.

You say that companies look after their shareholders first and customers second, you're missing out an important cause and effect here: in a proper market companies that mistreat their customers end up hurting their shareholders as well. That's a simple fact of business: the customers pay the money to make the profits to pay the shareholders' dividends. Give the customers the goods or services they want in the right place at the right price and they will buy them, and your shareholders will benefit! Simple! It's only when markets get distorted that companies can hide behind the distortions away from this simple business premise. Government control and bailouts, for reasons that I have given above, are massive distorting factors. Companies are less responsive to their customers needs when they know they can get a government bailout if things get tough, not more responsive!

I completely agree with your comments regarding the 'land of free enterprise' bailing out its airlines, even in the light of the sad events of 11-SEP-01, but I don't think tit-for-tat EU bail-out is the answer. Where predatory pricing based upon government subsidy could be proved, a selective duty on trans-atlantic US airline passengers at the EU end might be a way of levelling the playing field (but would never happen, IMHO, because it would be a PR disaster).

foggy.

[ 10 November 2001: Message edited by: foghorn ]

[flypastpastfast]

I have to agree partly with WAIF-er here. The point is valid. If for example, on sept 11th, three budget airlines in the UK and BA/BMI were all hijacked, they may all end up going to the wall. As has been pointed out, in order to ensure economic recovery thereafter, it could ONLY be a state airline that could underwrite the risks and costs, as investors sure as hell wouldn't.

The notion that under no cirumstances whatever can an airline recieve state aid is a flawed argument. So many scenarios could evolve making it impossible to run airlines commercially..biological attacks, nuclear attacks and so on.

Anyone who knows the ABC of economics would concur. State control will always be an option, for the benefit of the state involved and to allow for economic growth in the future.

Investors will only invest where there exists a possibility to make profit. With the best will in the world, the possibility to make profit does not always exist.

As regards railtrack, good on stephen Byers - I never could quite get a grip on a private company that pays dividends to investors, performs very badly and yet receives massive government subsidy. If it was so good, why did it depend on taxpayers money to stay in business? Shame it wasn't done five years ago.

[foghorn]

OK, let's exclude the scenario of total or near-total war when commercial enterprise goes out of the window for survival and the greater good. I can't see many other cases for state ownership.

[tilii]

Foghorn

There are many scenarios other than war which can drive investors away from airlines. It seems to me that many of those who have in the past started airlines, or even merely invested in them, have had (shall we say obscure) motives such as a need for the cash flow that an airline generates.

Given the enormous investment needed to succeed, coupled with the potential risk, it is quite easy to see the need for state enterprise.

Believe it or not, it is quite possible that even MOL will up stumps and leave the field if the going gets tough. After all, when you pull the kind of moolah that he has, retirement is an easy option - unless of course one is driven by pure greed and a fear of losing the millions one already has. :D ;)

[Stagnation Point]

FPPF

Agree with what you say, but doesn't it go further with the public transport, or lack of. The companies that bought into the public transport were basically guaranteed a profit by govt subsidies yet deliver, in general a poor service, unless you live in a large metropolitan area. This goes for Rail Track and all the Train operators as well, they are basically on govt contracts charging high fares and collecting subsidies to pay their shareholders dividens. I'll get to aviation shortly. Public transport is a necessity to a large extent, the country couldn't run if there wasn't an affordable mass transportation system.

Is Aviation a necessity or is it a Luxury? If it is a necessity then the govt is, in my humble opinion, duty bound to keep it available at a reasonable cost to the travelling public. If it is a luxury (eg concorde/holiday flights etc) then it is not.
If the govt were to subsidise airlines then they would have to be careful how they do it. Any subsidy should be to ensure the continuity of service and the continuity of employment, and should NOT go to ensuring an airline makes a profit.

What I hate seeing is private companies making profits from tax payers and providing a less than satisfactory service, so good on Mr Byers for dealing it to Rail Track.

[ 11 November 2001: Message edited by: Stagnation Point ]

[Pdub]

I suppose it all depends on what you want from a nationalised airline. A grossly inefficient dinosaur that covers all bases, or "Marginal Air" that flies to places that are not commercially viable.

Now the first option is a bit of a non starter, not least because every time you wanted to borrow a bit of cash to buy a new bit of kit, the Treasury would have to give the OK and carry that on the PSBR. And the Treasury hates to say yes.

If you want to run "Marginal Air" why own the company that does it? you get into all sorts of hassles owning a company, having to pay staff, fund pensions, and then you leave office and the incoming party flogs it off. Much easier to just say " We have determined that it advatangeous for the country to have an air service between Mutchington Gromly and The Isle of Macdonald, as this a non profitable route a subsidy will be offered for this route, tenders in by next Saturday teatime"

[tilii]

Pdub I suppose it all depends on what you want from a nationalised airline. A grossly inefficient dinosaur that covers all bases, or "Marginal Air" that flies to places that are not commercially viable.The point is that the 'Marginal Airs' of this world will not fly somewhere commercially unviable. Which is precisely why there is an argument for state airlines. :rolleyes:

[GlueBall]

Allow any state to subsidize only specific essential air service routes rather than to operate a state airline. No taxpayer should have to subsidize white elephants like Sabena or Swissair. And likewise, no taxpayer should ever have to subsidize the losses of any private airline.

Personally, I don't have a problem with big salaries and big bonuses for employes of private airlines. But I do have a problem when US taxpayers have to fork over $5 Billion Dollars in free cash to companies like UAL, AA, and DL whose senior pilots and senior managers are highly overpaid. :(

[Young Paul]

I'd sooner respond like that to an emergency situation than to have a £5 tax levied upon me (and everybody else in the EU) to keep Air France operating - as happened in the '90's when they were being bailed out by the "French" government - using Euromoney.

What an awful sentence. You get the drift, anyway, I hope.