The US terrorist attacks have exposed the fragility of the world airline industry. Governments are being asked to step in with assistance, but that is not a long-term answer for an industry which needs the freedom to behave more rather than less like a commercial business and to build up the financial resources necessary to help it weather the next crisis

Anyone who has spent time in air transport knows only too well that all forecasts need to be qualified with that familiar phrase barring any catastrophes. On 11 September that catastrophe indeed happened as terrorists revealed a new and bloody way to hijack aircraft.

For an airline industry already in the grip of a steep downturn, pending disaster has turned to crisis. What was already shaping up to be the worst year in a decade, for many is now an outright fight for survival. In short, the attack has exposed just how fragile air transport really is both in terms of security and its financial health. It is likely to be the second of these issues that proves the more difficult and the more critical to fix. And the task will only be made harder if the current rush for government support is not checked.

Clearly, the industry entered uncharted territory on 11 September. Never before has air transport seen such a terrorist act and certainly not on the US mainland. The nearest examples stem either from more isolated terrorist action, such as Lockerbie, or from the experience of the Gulf War in 1991, when US and European carriers faced an immediate 24%drop in traffic and US travellers abandoned the transatlantic in their thousands.

Such comparisons have immediately persuaded the US majors to make unprecedented 20% cuts in their cost base. Some 100,000 jobs are to go along with routes and aircraft. In fact, this time could be worse - and certainly it is less predictable - not least because the attack is not an end in itself but just the start of a chain of events which could again end with a shooting war. Also this crisis has struck at the heart of the mighty US domestic market in a way that previous disasters have not. If the Gulf War experience is repeated it could be months before the US travelling public regains confidence and returns to the air.

And while the cutbacks were still being announced, the US majors were at the same time standing before Congress asking for cash to help them over the crisis. European counterparts have not been far behind, either in seeking cuts or cash. The calls for assistance fall into three broad areas: aid for insurance, security and lost revenues.

The first is not too controversial. Given the enormity of the events unfolding in the USA, there was a danger that war risk cover would become unaffordable. Governments could rightly be expected to step in as an insurer of last resort for carriers so caught up in the politics of terror.

Security too is an issue more properly overseen and funded by governments rather than commercial companies, even if they are ultimately co-opted to carry out some or much of the work. Understandably there has been much talk of stepping up security within the airline system, ranging from identity checks through to bullet-proof cockpit doors and armed sky marshals. Such measures do need to be taken, and need to be seen to be taken, in order to reassure an uncertain public. However, the truth is that the tactics of 11 September are unlikely to succeed again in future, having now lost the necessary element of surprise. There will be other attacks on the air system but no-one truly knows from where or when. If they are to be prevented then the alert must be raised well before the terrorist or suspect bag makes its way into the air transport system. By then it is already too late to guarantee safety. Raising those alerts must be the task of national security and immigration services, not airlines.

True, the US industry will have to trade some of its legendary convenience in favour of tighter security, but that is no more than Europe has had to do all along.

Then come the calls for help in making up the revenue shortfall. Again there is clear evidence that the US air transport industry, which turns over close to $400 million a day, had real and immediate losses from the four-day grounding. Since that grounding was called as a matter of national security, it seems fair that the government could help with this clear-cut loss of revenue. More worrying are the broader calls for help with lost revenues. Not only do such calls put the US industry in debt to government, but they set a precedent for the rest of the world, not least some of the struggling flag carriers in Europe's over-subscribed air market. Brussels is right to take a hard line against those who would turn back on the decade-long battle to rid the industry of state aid.

In the wake of these attacks, there is a basic choice to make. Is the airline industry going to become a sound commercial business strong enough to withstand the shocks that will inevitably continue to strike? Or must it effectively become, or in some cases remain, a public service under the protective wing of government? If it is to be the former then the industry must be given a much freer hand to consolidate and compete around the globe. In short, to act in the same way as other globalising industries from banking to steel. If the terrorist attacks help to prompt that change then the industry stands a chance of emerging all the stronger from its present crisis.

Source: Airline Business