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Bertrand Russell Peace Foundation
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Catalogue
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Socialist Renewal - third series: 3
Railtracks in the Sky
'New' Labour, Air Traffic
Deregulation and the Competitive Market
by Peter Reed
Book review by Stephen Gruneberg
Journal of Air Transport Management 11; 2005 pp 297-299
Perhaps more than any other
industry, aviation has relied on government intervention for its technological
development, safety standards and international operation.
However, the systems of public sector regulation, supervision and
participation have steadily been eroded to be replaced by a new system that is
based on market forces. In
‘Railtracks in the Sky’ Peter Reed presents a convincing argument that the
faith of ‘New’ Labour in deregulation of the aviation industry is at best
misguided and at worst threatening and destructive.
He regrets the separation of the National Air Traffic Services from the
Civil Aviation Authority. He
rejects the notion that there is evidence to support the faith in free market
economics being advocated by the UK government.
He points out and demonstrates airfares were on a long-run decline long
before any talk of deregulation or privatisation was being seriously
considered by government.
But this book is much more
than a book about air transport or UK aviation policy.
Of course, it is primarily concerned with air traffic control and the
problems of the aviation industry, but it goes much further and wider.
The aviation issues raised serve as an example in the debate about
government intervention versus free market economics, updated to take account
of the international nature of the airline industry, inter-governmental
co-operation and rivalry, and developments in technology, not least
information technology.
Reed deals with a number of
major issues facing the airline industry.
Each chapter deals with a different question.
Has state intervention hindered growth and development in the aviation
industry? Has deregulation in the
United States proved so successful that we should follow suit?
Do free markets solve the problem of airport congestion?
Is privatisation of the airline infrastructure the best way to invest
in air traffic control and safety systems?
Whose interests are best served by national and international aviation
deregulation, market competition and privatisation?
As a former academic and later
General Manager Economic Regulation in the Civil Aviation Authority, Peter
Reed was responsible for all British aviation economic regulation and has led
international negotiations. As a
result he has extensive experience of the aviation industry to draw on and the
book is largely written from an ex-regulators point of view. He integrates into a coherent argument technical issues, such
as the guarantees offered by Air Travel Organisers’ Licensing, the operation
of yield management and Denied Boarding Compensation, the real implications of
Computerised Reservation Systems, the hub and spoke system in the US,
‘Grandfather Rights’, and many other features of the UK and international
airline industry.
While many argue in favour of
deregulation as if there is no longer a case to answer, Reed points out that
international aviation agreements reflect international power politics.
He presents a strong and supported case that, due to deregulation
combined with governmental participation, the support given to its own
airlines by each country tends to favour those in the strongest political
position. As Europe remains
divided, particularly in aviation terms, this gives US airlines a clear
advantage. Moreover, he reveals
how the workings of the World Trade Organisation, and even the North American
Free Trade Agreement and the Multinational Agreement on Investment work in the
interest of multinationals, denying regulatory bodies representing the
interests of elected governments the power to intervene.
This is no to say there is no bureaucracy. On the contrary there has been a proliferation of public
bodies, but they rely on a faith in market forces rather than negotiated
agreements to justify their intervention and it is far from proven that market
forces can deliver ‘the objectives of the community’.
Reed concludes by proposing
his ‘modern’ approach to tackling the management and policy issues of the
aviation industry. He pleads for
open and democratic debate to regain control over the foibles of a
market-based ‘theology’. He
suggests that rather than leaving things to random market outcomes, society
should decide what its objectives are for the aviation industry and what
aviation-specific regulations would be needed to achieve them, with perhaps a
European wide aviation authority to counter-balance American economic and
political power. This is a wish
list of someone who was at one time an Economic Adviser at the Ministry of
Transport in the UK.
If nothing else Reed posed
important, often uncomfortable, questions of those in the industry, government
and regulators, questions, which need to be addressed and require an answer.
If these questions are current in nature, the theoretical framework he
provides will serve as a lasting case study in the dismantling of a public
sector system that served the interests and safety of consumers, the airlines,
and the general public.
If there are any shortcomings in this book, one of them is that it lacks an index. Although Reed presents a closely argued case, the text appears polemic in places, which for some readers may appear to show bias. The author does not avoid controversy, but it is this, which makes the book provocative, stimulating and worthwhile to read. It is true that it deals with current issues and is addressed to politicians, policy makers, regulators and the airline companies as well as students of the industry. There is much in it that will stand the test of time as a case study in successful and unsuccessful government intervention in an industry. This is an erudite well-sourced book by someone with personal knowledge and intimate experience of the industry.
It is beautifully written – a pleasure to read.
Price £9.99
ISBN: 978 0 85124 671 0
paperback | pp 136
