Monday, July 05, 2004
United Airlines: Reform or Flop
St. Louis Post-Dispatch Discovers the Market
In an editorial on Saturday, the St. Louis Post-Dispatch supported the recent US Treasury Department decision to not provide loan guarantees to United Airlines. The editorial said, in part:
With Uncle Sam now out of the picture, it's time for some harsh realism all around. Creditors and labor will have to give in. If not, United eventually will stop flying, leaving creditors poorer and workers jobless. The American economy would go on with barely a hiccup as United's voracious competitors snap up its passengers. That's capitalism. It's not pretty, but it is very efficient.
The paper further noted that only $1.6 billion of the $10 billion Congress authorized has been granted in loan guarantees to help the airlines recover from "911". This does not, however, keep the people who don't know the difference between user fees and subsidies from claiming that the airlines are subsidized (compensation for war related damage is like federal disaster relief --- hardly a recurring, general subsidy). If the airlines were to receive the same level of general subsidy per passenger mile as Amtrak, $150 billion annually would be required. At transit rates, nearly $300 billion would be required.
The editorial is further evidence that the editorial board of the newspaper is beginning to face the world more realistically. An editorial of this ilk could not have been produced back when the paper was referred to by its critics as "Pravda on the Mississippi." Congratulations, Post.
In an editorial on Saturday, the St. Louis Post-Dispatch supported the recent US Treasury Department decision to not provide loan guarantees to United Airlines. The editorial said, in part:
With Uncle Sam now out of the picture, it's time for some harsh realism all around. Creditors and labor will have to give in. If not, United eventually will stop flying, leaving creditors poorer and workers jobless. The American economy would go on with barely a hiccup as United's voracious competitors snap up its passengers. That's capitalism. It's not pretty, but it is very efficient.
The paper further noted that only $1.6 billion of the $10 billion Congress authorized has been granted in loan guarantees to help the airlines recover from "911". This does not, however, keep the people who don't know the difference between user fees and subsidies from claiming that the airlines are subsidized (compensation for war related damage is like federal disaster relief --- hardly a recurring, general subsidy). If the airlines were to receive the same level of general subsidy per passenger mile as Amtrak, $150 billion annually would be required. At transit rates, nearly $300 billion would be required.
The editorial is further evidence that the editorial board of the newspaper is beginning to face the world more realistically. An editorial of this ilk could not have been produced back when the paper was referred to by its critics as "Pravda on the Mississippi." Congratulations, Post.
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