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Save US Airways
Opinion · May 16, 2002

Market forces should have killed US Airways long ago. Years of mismanagement, a bungled merger with United Airlines and the burden of the industry's highest labor costs, left the Arlington, Va., carrier in critical condition. And a dismal last year, in which the airline lost a record a $2.12 billion, put it on life support.

Now US Airways is teetering on the brink of bankruptcy. If a restructuring plan that includes lowering its labor costs, deploying more regional jets and securing a government-guaranteed loan under the Air Transportation Safety and System Stabilization Act doesn't work, the airline will almost certainly die.

Pulling the plug on US Airways may seem like the reasonable - even humane - thing to do. But we shouldn't let it expire.

Not because the government has an obligation to prop up our faltering airline industry, a business that despite federal aid lost an astounding $7 billion last year. Not because the airline's new management team should be given a chance to correct the mistakes of its predecessors. The errors are so profound, so grievous, that it will take years, and perhaps even decades, to fully recover from them.

No, US Airways must be resuscitated because it is in the interests of the flying public to have more, not fewer, commercial airlines.

Won't the likes of AirTran Airways, JetBlue Airways and Southwest Airlines, immediately step in to fill the void left by a lifeless US Airways? Not entirely. In markets where the airline competed with rivals like Delta Air Lines and American Airlines, going out of business could translate into immediate fare increases. This will serve no one except the airlines left standing.

And their victory will probably be short-lived. Once US Airways falls it could precipitate a "domino effect" in which other weakened airlines collapse one after the other. United Airlines. Continental Airlines. Northwest Airlines. In an industry in which success isn't measured by profit, but by how small your losses are, they could easily meet the same fate.

A day will come in the not-too-distant future when the skies are dominated by one or two major carriers. This new airline 'trust' is exactly what the government was trying to prevent when it deregulated the airline industry during the Carter administration. The government wanted to increase competition by dismantling the Civil Aeronautics Board, a well-intentioned plan that is partly responsible for the current airline malaise.

Can federal loan guarantees save US Airways? Unlikely. Government money treats the symptom but is no cure for the airline's troubles. How about downsizing? It's already been tried, when the airline furloughed some of its 35,000 employees last year. It seems clear that US Airways will either survive as a major airline - or perish.

To be sure, US Airways needs an ambitious and foolproof restructuring plan that takes into account some of the new realities of 21st Century airline travel. Its current strategy, as articulated in its filings with the Securities and Exchange Commission and to its customers, is vague at best. Shareholders who have watched the value of their stock drop from a one-year high of $26 to less than $3 recently should be wondering about the details of its reorganization.

There are those who believe the only way out of this mess is to return to a more tightly regulated airline industry in which fares are fixed by the government. But the old federal price controls clearly impeded competition in the airline industry, making it difficult for upstart carriers to enter new markets.

Instead, the government must re-evaluate the ground rules under which airlines operate today. Predatory pricing - which is basically a high-stakes game of "chicken" between two airlines - should be banned once and for all. Such behavior is designed to leave only one airline standing. It's anticompetitive and should be illegal.

By compelling the airlines to curb their instincts to crush competitors in a free market, it will allow the likes of US Airways to share an airport with airlines like Southwest and JetBlue without feeling threatened. When carriers aren't constantly undercutting one another to the point where it's impossible to turn a profit, then every airline has a fighting chance to survive.

US Airways and its rivals should be compelled to sign a consent decree to that effect - while they still can.

Christopher Elliott is a travel commentator based in Key Largo, Fla. All e-mailed questions may be edited, condensed or republished at the site's discretion.