Friday, 20 November 2009

Flights of fancy

Of all the markets in the markets in the world, one of the most nonsensically regulated is the air travel market. Countries are still clinging on to the antiquated notion that somehow national interests are involved in the aviation sector and “national airlines”, however dinosaur like they may be, must be propped up.

This post is prompted by the news that Germany has asked Emirates to raise its business class fares for flights out of Germany. Emirates, faced with big fines, has been forced to raise its rates by some 20%.

Airlines flying in and out of Germany are policed by the unfortunately named Federal Office for Goods Transport. This august body has written to Emirates saying it was “not allowed to engage in price leadership" on routes out of Germany to non-EU countries. Apparently it was acting under a law used in cases where "public transport interests are being permanently damaged". Apparently European carriers can indulge in “price leadership”. Only non EU airlines should not. Have you heard of the R word ?

Can you believe that such words are being mouthed in the 21st century . Its easy to see behind the fig leaf. Lufthansa has simply arm twisted the authorities to prevent Emirates from undercutting it.

The most closed of markets in the world is the airline market. Who can fly where is governed by complex inter government agreements. Slots at airports are jingoistically protected. All sorts of tariffs are levied. Sick airlines are state supported. It’s a complete mess.

The EU is frankly one of the most blatant of cartels that exists. The EU has no business lecturing anybody on free trade. It is supposed to be the largest economy on earth, larger than the US. But then its not a nation – its just a cartel. And look at what it has done today. Supposedly democratic, it has taken a leaf straight out of Stalin’s notebook. Behind closed doors, some 20 odd people, in classic skulduggery, have chosen Herman van Rompuy as its President. Herman who ??

In the middle of it all is the poor consumer. Although you could argue that by definition an airline customer is not poor. But that’s no excuse for governments to conspire to screw him. Free the airline market around the world. And hey presto – fares will fall AND customer experience will improve. Heard of free trade and competition Mr van Rompuy?


Savitha said...

Nice post, Ramesh. Not only here, everywhere, why is that the head/president is always chosen by a group of people within closed doors?
Even in a democracy??

Durga said...

Haha. No one would have heard of free trade. Monopoly is their mantra.

Deepa said...

Sorry for being away from the class sir :(, but I did catch up on the lectures I missed.

Competition and free trade have always benefited both the consumers and the traders equally. This one is more the style of mafias who would bully people and get things done their way. It sounds so regressive. In contrast, I would appreciate Mr. Praful Patel for having rapped AI on the knuckles for the mess that it is in. Although, AI's mess has a lot to do with bureaucracy itself, but atleast the aviation minister's thought process is right!

Sandhya Sriram said...

Is there someway we can protect your blog from being read by anyone who has the slightest connection with the aviation ministry of India. the last we want is similar ideas traversing eastward.

Ramesh said...

@Savitha - The choice of the EU President is actually quite bizarre - they tried to get the least qualified candidate !!

@Durga - Yes, free trade stops at being the subject matter for preaching

@Deepa - Oh Ho - I shall stop lecturing forthwith !! Yeah the airline industry would set itself right if they simply deregulated it and let competition handle things. Btw - blog more yourself - missing your posts

@Sandhya - Mine's a poor languishing blog sustained by wonderful friends such as you. No chance for it to come anywhere near the powers that be :)

Deepa said...

:P I didn't mean it like that. Even a dyslexic kid (can't call myself that anymore though) like me, can percieve things more objectively, thanks to your blogs. :)

Ramesh said...

@Deepa - Only kidding. I love to be a lecturer !! And whats this about preceiving things more objectively ?? - you're one of the smartest girls I know.

Deepa said...

:):) I'll just revel in this moment.

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