After 9/11, What Role Should Government Play In Civil Aviation?

They say that breakin' up is hard to do;
now I know, I know that it's true.
Don't say that this is the end.
Instead of breakin' up
I wish that we were makin' up again.
--"Breaking Up Is Hard To Do," Neil Sedaka & Howard Greenfield

It's been the lament of the airline industry since Washington decided to deregulate the airline industry almost 25 years ago. Let the marketplace decide, said the lawmakers. Let the unions and the owners work it out for themselves, they said. Keep the foreign investors from owning a majority of shares in any airline and the customer will ultimately benefit. Really. That's the plan.

25 Years Later, How's That Working Out?

Not so well, according to some lawmakers and industry experts. The New York Times reports in Sunday's editions that one problem is what's left of the cozy, regulated relationship prior to deregulation and the idea among some observers that different carriers get different treatment at different times in their economic cycles.

The Times quotes Clifford Winston, a Brookings Institute economist, as saying, the government's "residual presence" in the industry has created "a mindset that you can use the government for your own purposes" and "has diverted the carriers' attentions from working out their problems themselves.

Airlines To TSA: Show Us The Money

Case in point: Airlines, whomped by the September 11, 2001, attacks, have already received one bailout from the government in the amount of $15 billion. Now... another aid bill, this one worth $3.8 billion, is pending. Yet, it is embroiled in controversy about which airline should get how much, or whether any airline should get anything at all. "It is largely start-and-stop right now," Rep. James L. Oberstar (D-MN), the Democrats' ranking member on the House Transportation Committee, told the Times. The money, approved by President Bush last month, is supposed to reimburse airlines for the costs of enhanced security. Most of the money to pay for the bill comes from - you guessed it - the airlines themselves, in the form of a $2.50 tax on every leg of every trip. Beleagured airlines are hopping mad over that one.

The TSA is now trying to mete out the aid to 71 different airlines impacted by 9/11, SARS, the war on terror and the war in Iraq.

"It is Congress' responsibility post-9/11 to assume the security costs as a part of national defense," Jim May, chief executive of the ATA, told the Times. "You can't pay for it, then, when it's convenient, lay it off on the airlines." ATA wants the tax permanently revoked.

But critics disagree. Kevin Mitchell, president of the Business Travel Coalition, says having the airlines pay for enhanced security is just like having the airlines pay for engine maintenance. "They have to address those new risks and those new requirements in order to service their customers," he told the Times. "That seems to be an identifiable new part of the environment. Why are taxpayers funding that?" Well, taxpayers may not be, but air passengers are still paying that $2.50/leg tax.

"That's puzzling to me how that worked out," said Oberstar in the Times article, saying he's not in favor of rescinding the security tax.

Brookings' economist Winston puts it this way: this entire bail-out mess is just another example of the government getting "involved in areas where it doesn't have expertise."

FMI: www.air-transport.org