WHEN STATES GET INVOLVED IN AIR TRANSPORT

01 Apr 2023

This is nothing new. Since the creation of aeronautics, governments have always been interested in air transport, if only to get their hands on it. Let’s be frank, without state support, airlines would have had no chance of developing as they did, but low-cost carriers were only able to attract a new segment of customers by remaining independent of governments. In short, the governance of this sector by politicians and administrative authorities is both the best and the worst thing that could have happened to it.

First of all, it was the best because it was necessary to regulate the airspace well. And who else but the state could do it? The creation of ICAO (International Civil Aviation Organization) by the Chicago Convention in November 1944 is the result of the intelligent cooperation of states and their delegates. It is at the origin of all civil aviation, whether it is the sharing of airspace, safety rules, and even the validation of aircraft. The principle that all air transport would be administered according to the same rules regardless of the country is simply brilliant. It was not so easy to decide, let us not forget that we were then in the middle of the Second World War. The same conference delegated to the states the modalities of application of the main principles it enacted. It was both a way to preserve the will of each country to manage its airspace while obliging it to apply common rules.

Once the main lines of air transport management had been finalized, it was necessary to create the operators responsible for opening airlines and developing markets. Again, this would not have been possible without the support of countries. This is how most of the large historical companies began by being nationalized. They have been able to develop under the administrative and economic protection of governments and thus create the world’s leading network of air transport. It was then realized how indispensable it could become not only to the economies of countries but to their international prestige. Recently, governments have had to intervene massively to avoid the bankruptcy of many carriers during the deplorable crossing of Covid.

But any good side of a coin also has its flip side. First of all, it has put the national companies in a material comfort from which they have certainly prospered, except that they have forgotten the economic fundamentals knowing that their governments will never let them down. And the excesses of management began, often because the rulers took advantage of it to put at the head of the national carriers the friends to whom we owed some services. However, these officials were not always the best professionals, and from cronyism to cronyism, we saw the granting of free tickets, often in the highest classes, flourish excessively. Eventually, in many countries, the airline became a pleasant refuge for people we didn’t know what to do with.

Only after the period in which modern air transport was built, came the period of fierce competition from the moment when airspace was freed up with the creation of ?“open skies” and fares were liberalized. This has left ample room for new carriers built on economic, not political, fundamentals.

They were able to put on the market tariffs such that the incumbent companies were not able to follow them except to lose money. The public was delighted, manufacturers could develop new ranges of much more efficient devices and sell them by the thousands in all corners of the world. So to protect their national airline and avoid having to bail it out permanently, states invented administrative rules which, under the pretext of protecting the populations living near airports, were created to prevent competitors from accessing the most convenient platforms at the most convenient times. This is exactly what happened at Orly, which is managed with movement quotas while Roissy is managed with noise quotas. Similar restrictions are being found in many other countries.

And finally, the states took advantage of the tremendous amount of air transport to find a tax windfall of prime importance. Some such as the Dominican Republic have abused it by levying excessive taxes on jet fuel to such an extent that it has scared away many carriers who brought a tourist clientele that the country needs enormously. This confirms the adage “ too much tax kills tax”.

We cannot do without the stranglehold of states, but they must remain only in their field of competence.