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Aviation History
1950
1950 - 2055.PDF
FLIGHT, 30 November 1950 503 AIRLINE COMPETITION ... about the control of frequency and capacity, as well as com-petition in general, arose from taking a limited view of the whole problem. The proper view should include not only the aviationbusiness aspects, but the broad political problem as well. 1'he low average load-factors seen on over-serviced rouies wasoften due to the existence of several companies all struggling to get enough business to allow economical operation. Thesemight be classed academically as the most efficient, the marginal and the sub-marginal. It was significant that while the mar-ginal companies had reason to stay in the picture, the sub- marginal operators, who had little or no chance of economicoperation, did not go out of business. They continued to operate at a loss, often by reason of national prestige or defenceconsiderations, or merely because of broad economic relation- ships of their own country with other nations. The governmentsbehind them appeared to believe that their losses were offset by a national gain somewhere else. Dr. Baker felt that thinkingin this connection was often "fuzzy" and that a more hard- headed approach to the problem might well indicate that thevarious national interests were not necessarily furthered to a degree which would offset the real losses being suffered. It was in such a period of continuing losses that the industryfound itself living to-day. Under these conditions the very greatest care should be taken not to advocate the reductionof competition purely in order to minimize the losses which governments apparently felt were offset already by politicalor economic gains elsewhere. It was through competition that' the industry would eventually be able to reach a conditionwhere losses would not have to be made up from other sources. On the question of how much it was safe to reduce presentcompetition without affecting the chances of continuing import- ant advances in the air transport world, the lecturer consideredthat, as it was difficult to choose the companies to be elimin- ated, it was more desirable to maintain the status quo. If itwere possible to group existing lines into a few highly com- petitive operators, however, it would appear that little wouldbe lost and much would be gained. Summarizing the first part of his lecture, Dr. Baker stressedthat there could be no prediction of what would happen in a situation where decisions had to be based on inadequate infor-mation. It seemed likely that competition from airlines and from surface carriers would tend to maintain the pressure formore control of service. It was vital that companies and governments should conform with the requests now being madeby I.C.A.O. for the necessary information. If this were done it could be predicted that an industry with the foresight, capabilityand leadership which he believed existed in air transport could work out " some pretty wise formulation of the competitiveproblem." The Troubled Future Emphasizing that the foregoing remarks might be taken toapply to a possible World War III period, or to one which followed a much more troubled course of international affairsthan that now prevailing, the speaker proceeded to approach the question of competition as he thought it would have to behandled in "the very troubled years which probably do lie ahead of us." For the next five or ten years he thought that there weretwo major possibilities. The first was a period of world-wide war; the second, a continuation and probably an intensificationof the -present minor wars. In either case the national defence element previously mentioned would become more andmore important and its impingement on the freedom of manage- ments to determine to what extent they would compete witheach other would become severe. Turning to world-war possibilities, he was of the opinionthat forces tending to restrict competition would result from the fact that, on outbreak of war, equipment and services becomean integral part of military operations. Routes which in peace- time were not in use would become necessary in indirect supportof the final all-important objective. In many countries, equip- ment would have to be taken from civilian non-essential employ-ment and put to direct military use—a course which, if handled simply on the basis of military need, without regard to the effecton competitive relationships, might often result in the most serious competitive inequities. It seemed inevitable, said the lecturer, that such inequitieswould make it essential to do away with competition in service as well as in rates during a world-war period. This could beachieved either by the merging of operations' on any one route or by the continued operation by individual State and privatelycontrolled companies under contracts to their own governments. In either case the governments would agree among themselveson the exact amount of service to be rendered. Moreover, it seemed unlikely that this elimination of competition would belimited to the belligerent nations, as with the total supply of transport equipment so limited in relation to the needs of a wareffort, it was inevitable that the warring nations would wish to arrange for as many civilian routes as possible to be served bythe aircraft of neutrals. Also, in any foreseeable world conflict the nations involvedwould probably have an even stricter control of aviation petrol than was the case with maritime fuel during the last war, whenfuel and insurance for neutral shipping was controlled by a U.K.-U.S. Combined Shipping Adjustment Board. At the end of a future war the neutral airlines would be theoperators with the latest experience, and probably with the public goodwill, on the routes on which the warring parties had with-drawn their operations. The main reason for the complete disappearance of serious competition would be not only that itwould take more aircraft to preserve that competition, but that the job of preserving it fairly was almost insuperable. Even with-out competition on individual routes it would be difficult to apportion equipment and crews in the war effort without causingapparent inequities in the post-war opportunities of individual carriers.Dr. Baker therefore considered it very important that the leaders of the transport industry should now look ahead to theestablishment of some organization to plan the allocation of routes and equipment. The work of such a war-time board, hesaid, might well benefit from the experience of maritime shipping in the last war. "Freezing" Competition The lecturer then turned his attention to the second possibility—that in the next ten years or so there would be a series of " Korean Incidents." In such a situation the question of " fair "treatment in the placing of government pressure upon competing companies under the same flag to give up equipment, or possiblyto have equipment actually requisitioned, would become even " more difficult. Dr. Baker was of the opinion that if this was thekind of world we were going to live in we should probably end up with some type of international organization to make thesedecisions. The most likely way of meeting this situation, if it proved chronic, seemed to be the protection of existing competi-tion by freezing it, or by exchanging losses on one route for benefits on another. All this would mean the lessening of servicecompetition. The lecturer said that he was rather doubtful of our chancesof not experiencing, in the next ten years, one or other of the two situations which he had mentioned. It seemed, therefore,that the chances were not too good of companies being able to continue to enjoy the amount of " management freedom " whichthey now possessed. This was most unfortunate from the point of view of the advance of international air transport. In apeaceful world, and in view of the lack of vital information necessary to a wise conclusion, he thought it more constructiveto leave the choice with managements, but, in the situation of continuing alerts or total war, it seemed essential that thereshould be international co-operation in the allocation of equip- ment, manpower and facilities. " At the moinent," he said, " Ido not see how this can be satisfactorily reconciled with the con- tinuation of the present freedom of managemental decision onthe service to be rendered to the public " Atlantic-pact Possibilities Dr. Baker expressed the view that international air transportinterests would find it advantageous to co-operate in setting up under the North Atlantic Treaty Organization the same kind jjfarrangement which is already under way in shipping. Investiga- tion would reveal that countries which were parties to the NorthAtlantic Pact controlled possibly 80 per cent of the aircraft not operated by the U.S.S.R. and its satellites. If we were fortunate enough to enjoy the luxury of worldpeace, the industry might best make progress by retaining full competition in service. There should be agreements on capacityand frequency between companies and not nations; the problem could not be wisely resolved unless certain load-factor data, notyet in existence, were made available. In the event of a world war, competition as such could be written off.If the world were faced with the third possibility—a series of relatively local outbursts of war—the tendency to greater controland less freedom would extend to the point where there was " little free, driving, productive enterprise left in the service partof the airline picture." Dr. Baker was confident, however, that an international air-transport industry faced with a period of such difficult decisions, although it lacked the valuable experience gained by the shippingindustry in World War II, nevertheless had " the quality of men to face reality, to plan ahead and, in the face of common danger,to reach the statesmanlike decision."
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