Regulatory Challenges in the Airline Industry - Things Are Not Getting Easier

By Lance Winslow

The amount of regulatory intervention into the airline industry is at an all-time high in 2012. In many regards that's too bad, as many airlines are struggling with big debt, increased fuel costs, and underfunded pensions. Meanwhile, as the airlines try to sort all of this out, we see there are plans for mergers and acquisitions, many of those are being held up by the regulatory authorities, and labor unions trying to influence their will upon the regulatory process.

Of course, antitrust regulatory bodies are not the only problem challenging the airline industry in 2012. Both the regulatory bodies in the EU and in the United States at the FAA are making it tougher on new airline models which have come onto the scene. Such safety regulations could easily cause billions of dollars in losses, or even future sales.

Yes, I speak of the 787, and Airbus' A380. It seems when one airline manufacturer has a problem, all the suddenly the regulatory body looks at their major competitor, and comes up with something to make it look like somehow they are on an even playing field. This is unfortunate as it undermines the company that's doing their best work, and allows their competitor to get away with shenanigans. I see this happening in the United States and the EU right now and expect those trends to continue [cite: review of all Airworthiness Directives thus far in 2012].

Recently, the Obama Administration's newest budget proposes FAA user fees, another tax on the airlines, which will obviously be passed on to the customer at a time when they are dealing with high fuel costs, exorbitant legacy costs, and union demands. Of course, if that wasn't bad enough the EU now has a new carbon tax on airliners, brought forth by a small minority group of global warming alarmists at the United Nations.

Right now, China, Russia, India, and the United States are all making formal complaints. However, perhaps the biggest losers will be smaller airlines with older airplanes from places like Africa, Eastern Europe, and South America, as they will not be able to afford newer aircraft for their European routes. In all of this, we can expect the Chinese to come up with spontaneous regulations as paybacks, as this is a common theme amongst China's leadership. Let the air-war trade war begin?

The Iranian sanctions are also a huge issue, and Iran is busy trying to finagle ways to buy newer airliners through subsidiaries and sneaky deals, so there will be more international rules complicating airliner sales throughout the world, due to fears of dual use technology, and violation of international sanctions, and that's really unfortunate, but not without some merit for the stress it will cause on the industry.

The Iranian sanctions are also going to severely affect the cost of fuel, putting more burdens on the airlines, and decreasing their passenger loads, therefore cutting flights as ticket sales rise, of course all that depends on the EU economic crisis, and economic growth in the first world. This plus the increased debt at the airlines for newer more efficient airplanes is taxing the international airline community, and we will carefully watch these challenges and regulatory trends throughout the year. Indeed I hope you will please consider all this and think on.

Lance Winslow has launched a new provocative series of eBooks on Aviation Concepts. Lance Winslow is a retired Founder of a Nationwide Franchise Chain, and now runs the Online Think Tank; http://www.worldthinktank.net