Air travel: Safe, but is it viable?

The Statesman, Asia News Network, Calcutta

Even if, as initial evidence suggests, American Airlines' Flight 578 was doomed by technical faults, not a terrorist plot, there's plenty for America and the world to worry about. The primary concern is the short term future of the aviation industry. Sept. 11 had already blown a few holes, through which even once venerable Swissair fell.

True, problems afflicting European airlines including national flag carriers in many other countries, not the least India, are structural and business cyclical. But the problems were already bad enough to allow Sept. 11 to act as a trigger. The real fear is that Nov. 12 may act as another woe multiplier, one that may take some airlines beyond even tax payer financed rescue packages. This is quite apart from technical questions that arise and need to be honestly answered after every air crash. Airbus, the airframe manufacturer, and GE, which provided A300's engines, are already facing an inquisition.

Questions will also be asked about American Airlines' maintenance. But inevitably, public interest in the technical details -- unless a shocking lapse is uncovered -- will fade. What will not, or not very soon, is the travelers' perception of safety. It may persist despite the evidence that air travel overall remains an astonishingly safe mode of transportation. Even a small dip in passenger confidence will hurt many airlines badly. This possible crisis offers governments everywhere a major opportunity -- thoroughgoing aviation reform.

Crucially this means governments giving up on their fetish for big national carriers, allow privatization of services, remove restrictions on foreign ownership -- even in the U.S. foreign carriers cannot fly domestic routes -- and cut down the jungle of bilateral flying deals.

Status quoists who fear such reforms will make operators unviable should look at how the so called small, independent airlines in the U.S. and Europe have performed. Ryanair, an Irish budget carrier, is, equity valuation wise, the biggest airline in Europe now, leaving such household brands as Lufthansa and British Airways behind.

EasyJet, another low fare European carrier, as well as the smaller carriers in the U.S. have also weathered the Sept. 11 air pockets better. The lesson here is that aviation industry needs to be deregulated in much the same way as the auto industry has been. Therefore, the U.S. Congress' bail out package for American carriers should be written off as an extraordinary response to an extraordinary situation, and not a signpost for other governments.

The same, of course, holds for India, which, having put up its national carriers for sale has found few takers. Buyers will not come forward unless the Indian government liberalizes the sales rules, including those on foreign airline ownership.

Not only that the civil aviation ministry also needs to frame a policy aimed at encouraging region-specific small carriers. The idea that two or three airlines should serve a continent sized country like India is preposterous, and only bureaucracy can be unmindful of the lost potential in terms of business, travel and tourism. But India will not move in that direction unless the U.S. and Europe liberalize, and pressure is thus put on New Delhi.