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Megalomania is airborne, business sense grounded

by Kevin Rafferty

HONG KONG — What is it about aircraft that can induce a serious bout of megalomania?

Richard Nixon, when he wanted to get away from the presidential office and imagine that he was in control of his own destiny, let alone that of the United States or the world, would take Air Force One for a spin to get a sense of perspective and see the world from an appropriate distance.

But is it not worrying when supposedly stone-sober airline bosses, ensconced in their offices with computers, spread sheets, and telephones telling of recalcitrant staff and stroppy passengers, start indulging in escapism and dreaming of their ideal world?

Willie Walsh, the former Aer Lingus pilot who is chief executive of British Airways, has laid out a huge stall of ambitions for when he achieves the merger with Spain’s Iberia. He wants to turn the new middling European airline into a world-beating monster.

He would like to buy 12 airlines, none named, chosen from his original wish list of 40. American Airlines and Qantas would be on the essential menu, but both have already posed problems for Walsh because of U.S. and Australian regulations restricting foreign ownership.

Bookmaker Paddy Power has opened bets, with Chile’s LAN Airlines (9/4 odds) and Cathay Pacific (11/4) at the top, followed by Japan Airlines (10/3), though Japan also has rules limiting foreigners to 33.3 percent. All these airlines are already associated with British Airways and Iberia through the Oneworld alliance.

Although there are hundreds of airlines in the world, the business is increasingly affected by ugly monopolistic tendencies. Governments often treat the national airline as a branded pet cow to be milked as needed. European countries are only just getting over the idea that they need a national airline to prove that they exist. Many developing countries have not reached that stage.

The worst offender is the U.S., which protects airlines from the cold breath of foreign competition but fails to protect passengers from monopoly and its consequences. With the “merger of equals” United and Continental, which will see Continental’s bosses slide into the top jobs under the United name, the U.S. will have just four major carriers.

Increasingly, U.S. airlines are gouging passengers with charges for things that originally were part of the ticket price, such as a checked bag, modest hand luggage, a soft drink on a long flight, a blanket and other fees.

In the U.S., if you try to pay cash, you are branded as a terrorist or drug runner, so airlines have begun charging for the privilege of paying by credit or charge card, charging for a confirmed seat, charging if you want to change your reservation, as well as charging for food.

This year U.S. airlines are on track to make $8 billion to $10 billion through additional charges. The only thing that can be said is that the Americans are not half as inventive in milking passengers as European budget airlines.

If Walsh achieves only part of his ambition, it will remove competition from that sector. Imagine what his purchase of Cathay, Qantas and JAL would do to competition between Europe, Asia and Australia. What brand and what service style would emerge?

Walsh’s style is reflected in the name of his British-Iberia airline — which is International Consolidated Airlines Group (usually shortened to International Airlines Group). Bean counters and merger bankers have taken over the spirit of the skies. The airline’s name must have been dreamed up by a Soviet apparatchik brought in belatedly from the permafrost of Siberia and seeking maximum hits on Google.

Another Irish airline boss has let loose another torrent of radical ambitions. Michael O’Leary, of the budget carrier Ryanair, was on his best braggadocio form in recent interviews where he repeated that he wants to charge a euro for using the lavatory and wants to remove two of the three lavatories to add more seats. He also wants to remove seats so that he can cram in standing passengers. Airline seats are built to withstand a “16G” force in case of turbulence. Standing passengers would have to be strapped and bound like Hannibal Lecter if they are to be secure.

O’Leary also wants to save money by sacking the second pilot. If the pilot has a heart attack, he should ring a bell so that one of the cabin crew trained to land the aircraft can take over with the computer.

Is O’Leary just too mad, dangerous and publicity-seeking to be in charge of an airline? Not to Bloomberg’s reporter, who came away convinced that “with much of the global industry struggling to survive, O’Leary’s subversive vision looks like a viable alternative to the status quo, which is threatened by obsolescence, attrition and consolidation. He says what others are thinking and, more often than not, doing.”

Ryanair last year was the world’s largest airline by international passengers at 65 million — far higher than Lufthansa’s 42 million, British Airways’ 25 million or JAL’s 12 million. But its model is based on treating passengers like cattle. When will O’Leary suggest flying by computers only, without any pilots? That would be cheapest of all.

How much safer and more comfortable it is to embrace the competitive spirit of flying that has Cathay, Emirates, Singapore Airlines and Thai vying to provide better service.

Japan has belatedly announced its first budget airlines: All Nippon Airways will ally with Hong Kong’s First Eastern Investment Group to set up an unnamed venture based at Kansai Airport and offering domestic and international routes. The Hong Kong company will take the maximum 33.3 percent stake permitted under Japanese law and, in turn, help secure those precious mainland and Asian routes and landing slots.

The new carrier gave no details as to what routes or aircraft it would fly, apart from saying it will start with five to 10 aircraft (making it tiny compared to Ryanair’s 250 aircraft or Air Asia’s 97).

It is not clear why anyone with a jelly bean for a brain would base a budget airline at Kansai, which is almost the most expensive airport in the world, is an hour away from the center of Osaka and has slow immigration and customs procedures.

Kansai’s failure is that the two big Japanese airlines no longer fly directly to Europe or North America from there. Kansai’s lure is to waive landing fees for new low-cost carriers for the first year — yet another example of how, in supposedly sophisticated Japan, aviation is a political game, trying to turn a white elephant into a working shade of gray.

Kevin Rafferty, editor in chief of Plain Words Media and based in Hong Kong, covers economic development and social issues.