My exchange with Daniel Hall earlier this week made it onto The Economist‘s Free Exchange, which was in turn picked up by Megan McArdle’s Asymmetrical Information.
The Economist writer brings in the intervention dimension:
[S]o politicised an industry as air travel need not fear dislocations in any case; governments would react incredibly quickly to pull back on any part of an agreed-upon energy bill that appeared to cause significant damage to airlines or aeroplane manufacturers. This, in fact, is one of the arguments made by carbon pricing sceptics–that governments will not allow the necessary pain to be felt.
McArdle follows this with
[G]overnments will not allow anything to harm the airline industry.
What I don’t quite understand is why this is so. Why is everyone obsessed with having protected domestic airlines, and indeed, airplane manufacturing capacity? . . . Now China, too, wants its own airframe manufacturer. And everyone wants to protect their national airlines.
Why is flying so emotional? And so heavily, heavily protected by the heavy hand of the state?
Two things to say about this: amen, but things may be looking up.
Aviation remains one of the most nationalized industries on the planet. British author Simon Calder once wrote, “For most of the first century of powered aviation, the traveller was expected to subsidise a hopelessly inefficient industry. Aviation grew as an adjunct to individual governments, a symbol of nationhood as crucial as a flag and an anthem–though considerably more expensive.”
Aerospace is also highly nationalist. Although the media (especially the Wall Street Journal) dramatically overstate the extent to which this is true, Airbus and Boeing are perceived as national proxies for the EU and the United States. Canada subsidizes Bombardier, and Brazil subsidizes its innovative entry Embraer (although both seem more and more willing to play by the rules of international free trade). The Soviet Union was the gold standard for national aircraft: produce Western knockoffs and sell them to state-run airlines in client states. Putin is following this playbook, recently consolidating the Soviet-era aircraft “design bureaus” in a single state-owned company, the United Aircraft Building Corporation. And China may be the worst of all, as I wrote last summer on TCS Daily. Japan and India are working on homegrown aircraft, too.
The reasons for this have a lot to do with national prestige (as regular readers know, I consider the pursuit of prestige to be a great bogeyman of sound aviation policy). But what I suggest in the TCS article is that the increasing nationalism of aerospace may have troubling geopolitical origins:
[W]e should be wary of China’s ambitions. Unlike Boeing and Airbus, ACAC and other Chinese aerospace companies are likely to be centrally managed by Beijing. And through its foreign activities, it has not only a huge domestic market but also a network of global buyers who would need little soft persuasion to buy a particular plane, lest the supply of Chinese money be shut off.
On the brighter side, airline nationalism is receding in some places. One of the great geniuses of Boeing has been its global supply chain. Its newer aircraft are not manufactured at the Everett, Washington, plant–they are manufactured by subcontractors all over the world and assembled at the Boeing factory. The 787 is not really a U.S.-made plane. It has a wide range of international stakeholders. Airbus practices this within Europe, but the falling dollar is threatening Airbus and has caused it to actually consider manufacturing in Alabama! The globalization of aerospace will continue as manufacturers seek further efficiencies, I suspect.
Airline nationalism is receding somewhat, too. While open skies deals with the U.S. don’t go as far as they could, Europe has successfully opened its airspace, at the expense of national airlines. Once-protected flag carriers have privatized (British Airways), merged (Air France-KLM), or restructured (Swiss). Belgium allowed its legendary Sabena to go under. Even Italy is seeking a buyer for its perpetual state-owned basket case Alitalia (named the “worst airline ever” by the Cranky Flier). And low-fare carriers like Ryanair, GermanWings, and easyJet have challenged the dinosaurs. I see this trend continuing, not being reversed.
Nationalism in air travel isn’t good, but it is slowly dying out.
Fear of flying [Megan McArdle]
