Aviation's Two Crises: One Controllable--The Other Not

According to the author of this article (Paragraph 10,201), government needs an aviation strategy for the new world we find ourselves in. The industry faces two crises, but they should not be confused, the author asserts, explaining that the "controllable crisis" can be handled by management, labor, and traditional government legal and regulatory institutions. On the other hand, the "uncontrollable crisis" is external to the industry, where outside forces can so alter the demand and cost factors for air travel that the airlines cannot reasonably be expected to deal with the crisis alone. The economic and legal environment created by government and industry has not allowed traditional network airlines to earn a reasonable, long-term return on capital, the author warns, urging government to take its "proper role" and establish the basic framework of boundaries and rules that makes success possible; then let the winners and losers sort themselves out in this highly competitive mass market. This is the "controllable crisis," according to the author. While re-regulation of the airline industry appeals to some, the author believes that consolidation is an economic inevitability. A primary lesson of airline deregulation may be that if government facilitates more competition in a market but denies reasonable consolidation through mergers, alliances, and attrition as a means of balancing capacity, the result can be competition that undermines reasonable return on capital. Meanwhile, terrorism can create uncontrollable demand decreases and cost increases that are beyond the reasonable ability of the private sector to absorb. It is hard to see how any airline's business model can reasonably factor in the risk of sustained terrorism against aviation without federal government assistance, the author says, urging the federal government to provide at least an open debate and decision about who should expect to cover which costs. The government has an important, legitimate role in each of these two crises, but it needs to look at them separately and face the debate about where its responsibility begins and ends when terrorism strikes and air transportation takes the blow. Airports and airlines will try to adapt to responsibilities they can reasonably absorb, but it is not possible to do so until the federal government decides its own role in the future when the crisis is uncontrollable, the author concludes.

• Corporate Authors:

  International Aviation Law Institute

  DePaul University College of Law, 25 E Jackson Boulevard
  Chicago, IL  United States  60604
• Authors:
  • Barclay, Charles M
• Publication Date: 2004

Language

• English

Media Info

• Media Type: Print
• Edition: Transfer Binder 1: 2001 to 2004
• Pagination: pp 4251-4261
• Monograph Title: Issues in Aviation Law and Policy

Subject/Index Terms

• TRT Terms: Consolidations; Economic factors; Federal government; Legal factors; Strategic planning; Terrorism
• Subject Areas: Aviation; Law;

Filing Info

• Accession Number: 01149561
• Record Type: Publication
• Files: TRIS
• Created Date: Jan 29 2010 12:03PM