Leveling the aerial playing field

ZOOMING IN

Rudy Romero

08/17/2007

It is perfectly natural for people to believe that the phrase “level-playing field” has only a terrestrial connotation. After all, a playing field is a piece of God’s earth.

But level-playing field can have a non-terrestrial connotation too. Indeed, any situation or circumstance that bespeaks lack of levelness can be a proper object for the use of the phrase level-playing field. The original of commercial air traffic in an air space, for instance.

Philippine Airlines (PAL) believes that a level-playing field situation does not exist where regulation of commercial use of Philippine air space — its aerial playing field — is concerned, and it has been advancing this position for a long time. This country’s aerial playing field is highly uneven, PAL maintains.

The nation’s largest airline says the playing field in Philippine skies is uneven because many other airlines, particularly airlines in the Middle East, are subsidized by their governments, which, in some cases, are their owners. Where the element of subsidy is present, a level-playing field situation cannot exist, PAL insists.

In 2004, the members of the Association of Southeast Asian Nations (Asean) agreed on an open-skies policy for the region, beginning with unlimited passenger flights between the Asean members’ capital cities in December 2008. The agreement will also allow for unlimited fifth freedom flights between all Asean capitals by December 2010 and unlimited operation of freighters, cargo flights (to and from designated Asian cargo gateways) by December 2008.

PAL has indicated to the government that open skies should not precede the establishment of a level playing field and that government subsidies to the regional airlines must be terminated before Asean’s aerial playing field can be considered even. Without the subsidies, it would have no objection to an Asean open-skies regime, PAL says.

In support of its position, PAL has pointed to, among other things, the Malaysian government’s bailout of Malaysian Airline System and its subsidization of MAS’ domestic operations, the Singaporean government’s granting of war risk insurance coverage to Singapore Airlines until October 2002 and the financial and other assistance granted by the Indonesian government to the national flag carries, Garuda Indonesian Airlines.

Predictably, PAL has adverted to the gigantic bailouts and very generous assistance given by the US government to the succession of troubled American carriers — of these the most spectacular were the bailouts of United Airlines, Delta Air Lines, Northwest Airlines, American Airlines and US Airways — and the not-much-less generous assistance packages granted to Swiss Air, Sabena Airlines and Olympic Airways by the governments of Switzerland, Belgium and Greece, respectively.

But arguably the most blatant of government subsidization of private air carriers has been found in Middle East, and PAL has not been reticient in its criticism of the hand-in-glove relationship between the Middle Eastern airlines and their governments. Chief among the Middle Eastern airline targets of PAL and other anti-subsidy groups has been Dubai-based Emirates, which has been among the biggest order-placers for the latest Airbus models (45 of the A-380, which seats 555 passengers, and the A-340-600, which has a slightly lower passenger capacity). The chairman of Australia’s carrier Qantas said it all when she declared at a recent International Air Transport Association conference, “To suggest that Emirates is competing on similar terms as commercially run airlines … is, quite frankly, fiction.”

To round out the list of government subsidizers of private air carriers, PAL has pointed to the Japanese government. Japan’s two airlines, Japan Airlines and All Nippon Airways, were granted emergency loans in 2003 to bail them out of their financial problems.

In contrast, PAL says, it had to undergo painful rehabilitation and work its way back to profitability without benefit of government financial or other assistance.

To any economist or good-management person, PAL has made out a good case. Any kind of level-playing field, whether terrestrial or aerial, is undoubtedly desirable. The trouble is, that with distortions such as subsidies, a paying field cannot be made level. PAL’s message, simply put, is open skies and a no-subsidy air transportation industry must go hand in hand.

(My e-mail address is rudy_v_romero@yahoo.com).

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