ECONOMY

Pride is what keeps airlines up in the air

Airlines are funny things. No matter how uneconomical or strategically illogical they are, most countries feel they are entitled to their own flag carrier. Hence the tenacious battle by many governments to keep insolvent state airlines flying, even at massive costs to the taxpayer. Such determination, however, flies in the face of European Union policy. The European airline industry needs to consolidate into five or six airlines along the lines of the US model, EU transport Commissioner Loyola de Palacio has said repeatedly. Only by doing so will European carriers be able to compete with their more efficient and more cost-productive counterparts across the Atlantic. The commissioner has said that it is near-impossible to maintain 14 flag carriers and a multitude of regional airlines in Europe and urged both countries and people to go beyond national logic and think only of European flag carriers. But national sentiments rather than economic sense have always tended to hold sway when it comes to ensuring an airline’s survival. One notable example is Swissair. The Swiss flag carrier’s failure last month shocked the world and dented Switzerland’s efficient, well-organized image. The government quickly came up with a controversial CHF 4.24-billion ($2.55 billion) rescue plan. With the help of the private sector, Swissair is to be rebuilt around its regional European subsidiary Crossair in a move that restores both the national image and saves tens of thousands of jobs. Swiss media said the injection of funds from more than a dozen companies pointed to a triumph of corporatism, ignoring the dubious if any benefits to shareholders. Similarly, the private sector in Belgium has been called on to revive bankrupt national carrier Sabena. Some Belgian companies, however, have been digging in their heels, calling the government’s announcement of contributions from 12 private groups as premature. Another country in denial, Ireland is currently negotiating a survival plan to prop up loss-making Aer Lingus. The government believes a national carrier is strategic for the US tourist trade, with 60 percent of revenues and 50 percent of profits coming from the transatlantic traffic. When it comes to national pride, businessmen can be as guilty as governments. Two of Australia’s leading businessmen last week agreed to fork out A$3.6 billion ($1.84 billion) to salvage Ansett, the second largest airline in the country that went bust in September. One of the magnates, Lindsay Fox, was quoted as saying that the pair intend to grow the airline back to where it was. Politics rather than national sentiments or corporate good will has kept Greek state carrier Olympic Airways up in the air for far longer than is logical. Government officials have said privately that the bankrupt company has no choice but to find a buyer or fold. And yet the sell-off process that started last year continues to get one extension after another as the government shies away from the consequences of closing a loss-making company intricately linked to pork barrel politics. Transport Minister Christos Verelis last week said a decision on the fate of the airline would be made by the end of the month, giving time to the two bidders to take up his suggestion that they join forces or bring in more reinforcements. While the preferred bidder Axon Airlines has expressed its willingness to follow through with the minister’s proposal, third-placed Integrated Airline Solutions (IAS) has ruled out any participation in a joint proposal until and unless the government gives its bid a fair hearing. The State should negotiate with IAS if not for four months as it did with Axon, then in one month, Grigoris Konstantelos, head of the union of Olympic pilots which is collaborating with IAS, told Kathimerini English Edition. The Australian bid was described as over-ambitious by privatization adviser Credit Suisse First Boston. Konstantelos said the company has since downsized its business plan following the crisis in the global travel and airline industries in the wake of the September 11 attacks. Our revised plan calls for a re-examination of Olympic’s long-range network and work force, he stressed. IAS had originally proposed to keep 5,500 full-time employees and 2,200 seasonal workers but has now pared the figures down by 500 and 200 respectively. The company has enlisted the support of magnates Constantine Angelopoulos, Pavlos N. Vardinoyiannis and Papagiorgiou among others. While logic calls for Olympic to be closed down, it is far more possible that the airline will be kept alive for the 2004 Olympic Games. Hard-headed businessman Theodoros Vassilakis, head of privately owned Aegean Airlines, recently expressed the fear that Greece could end up without a national carrier during that momentous event.