Editorial: Synchronicity

Although the two events are not related in any physical sense, a synchronicity exists between the shutdown of northern European airspace for six days in mid-April and the proposed merger between United Airlines and Continental Airlines, announced a few weeks later. The former once again has shown the absolute vulnerability of the airline industry to events over which it cannot possibly have any control. The latter illustrates a natural, if perhaps unintentional, response to this condition: Create an airline that is too big to fail, because the consequences of such a failure would be a massive and sustained dislocation of the transportation system that would rebound on the political leaders judged to be in charge at the time.

The rain of destruction that has been poured out upon the airline industry since the turn of the century is almost Biblical in scale: Think ten plagues, or Noah’s flood, or the destruction of Sodom and Gomorrah. Yet although Mother Nature can do a lot of damage, it usually takes humankind to transform bad fortune into absolute disaster, as happened in Europe following the eruption of the Icelandic volcano.

We have sympathy for European regulators faced with a rapidly developing situation and forced to make decisions with clear safety implications while lacking internationally recognized certification standards to guide them. Nonetheless, their response to the volcanic ash crisis was sadly inadequate and fully exposed the shortcomings of the EU’s fractured air navigation and safety regulatory systems, about which airlines have been complaining for decades. Who, exactly, was in charge? Eurocontrol (whose membership does not include Iceland, which is not a member of the EU)? EASA (which apparently lacks competency over air traffic matters)? The safety regulators and air navigation services providers of the 38 EU member states? ECAC? The European Commission? ICAO?

There could be no leadership from the top because there was no top. Yet even when authorities had the power to make decisions, they showed inflexibility and a lack of creativity. Thus we had the EC helpfully sending a reminder to airlines on April 16, as the crisis unfolded, that they had an open-ended, blank-check commitment to cover all of their passengers’ living expenses during the airspace shutdown and until such time as the carriers could rearrange future schedules to complete the disrupted trips.

In early May, having likely guaranteed that airlines will face disputes from aggrieved customers for years to come, the EC punted the issue back to the member states, telling them they could—if they desired—compensate their airlines for their reasonable passenger costs (so long as the measures do not distort competition). But with European treasuries set to pour hundreds of billions of euros into the crashing Greek economy, what is the likelihood of this occurring?

The lesson for the airline industry is that the world may depend on it to maintain a functioning global economy, but that doesn’t mean people necessarily like or sympathize with airlines and their problems. Nor should this be surprising: We all profess to like laws and justice, but from those twin goods rarely springs a love of lawyers and politicians.

This brings us to the merger of United and Continental. The combination is being touted by its supporters as both inevitable and much-needed in an industry in which consolidation is seen as the only salvation. The companies have said the merger will create “a stronger, more efficient airline” and “a strong platform for sustainable long-term value for shareholders,” with greater job security and opportunities for employees and more and better service and destinations for customers.

Maybe it will, although that’s a large leap of faith in an industry whose financial and job losses have only increased over the past 30 years as it has consolidated and as more and more US cities have shed air service. But it certainly will create a situation in which the remaining three largest US global network carriers (leaving aside US Airways) arguably become too big to fail. That may not have been on the minds of the boards of Continental and United when they met to discuss the merger, but it could become a reality at some point in the future when the industry faces its next plague.

Having watched politicians and regulators from both sides of the political divide pour tens of billions of dollars into other companies judged too big to fail, it is hard to disagree with any outcome, intended or otherwise, that is going to persuade them to do right by a business that keeps the wheels of global commerce turning.