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EIR HIGHLIGHT


To Save Airlines and Passengers,
Re-Regulate Air Travel Industry

The airliner attack disasters also had the effect of shining a sudden light on the terrible condition of the nation's air carriers, both from the financial and security standpoints. The most crucial causative factor--the 23-year experiment in "airline deregulation" is analyzed in a two-part feature in EIR for Oct. 5, 2001: by Richard Freeman on the sources of the airlines financial condition; and Washington reporter Carl Osgood on the deterioration of air travel security under deregulation. Here is the introduction to the feature.

Prior to the Sept. 11 deadly airliner attacks, the airline industry had already suffered serious economic problems, and some airlines were already on the bankruptcy path. This year, the deepening collapse of the U.S. and world economy had sharply contracted U.S. airline travel and revenue; by the second quarter of this year, major airlines like United and American had mounting losses.

But there is a second fundamental sickness, going back two decades, to President Jimmy Carter's insane decision on Oct. 24, 1978, to deregulate the airline industry. Deregulation ripped apart the preceding 40 years' dependable functioning of the aviation system, and has ravaged America's air transportation grid. In the world of deregulation, speculators took over airlines through leveraged buyouts, saddling them with huge debts; there was asset-stripping of the airlines: the precision and necessary upkeep and overhaul of plane engines and bodies, was reduced; costs were slashed; wages and benefits were sliced; air travel to dozens of smaller cities and towns was sharply reduced or abandoned.

The events of Sept. 11, when hijacked airliners were deliberately crashed into the World Trade Center and the Pentagon, show, once again, that deregulation has also created a security nightmare, from which only re-regulation can save us. The response of Congress, so far, has been to call for federalizing all airport security functions, including security of airport facilities as well as passenger screening.

Deregulation created a permanent management culture of cost-cutting, governing all airlines' management decisions, and leading the airlines to attempt to operate on the thinnest of margins. During so-called "normal" periods, this management culture allowed airlines to get by, even though it had debilitating effects on efficiency and safety. But, when the rate of U.S. economic depression became steeper, as it did this year, the airlines could not gouge enough further costs to survive; the pre-existing, deep and severe crisis came to light. Then, the Sept. 11 events intensified that crisis.

On Sept. 18, the U.S. Congress adopted a $15 billion assistance package for the airlines: $5 billion in grants, and $10 billion in loan guarantees. The stated intent to prevent the airline industry's collapse was a worthy one. However, the adopted legislation neither solves nor even addresses the airlines' long-term problems; it falls far short of the indispensable policy direction outlined by Lyndon LaRouche's proposal of Sept. 18, which calls for bankruptcy reorganization of this heavily indebted industry, and the extension of 10- to 20-year financing for capital projects necessary for its survival and that of its infrastructure (see EIR, Sept. 25, 2001").

A second step is indispensable: America must re-regulate the airline industry.

Thus, it is necessary to understand what regulation actually does in directing air transportation in the national interest, and the history of destruction that deregulation has produced, which lowered the functioning and solvency of the airline industry to a point of crisis well before Sept. 11.