Should foreign governments be in the International Airline Business - Essay Example

The Airline Deregulation Act in 1978 brought limited foreign sources to become part of the U.S airlines. This step reduced the pressure on the government to bail out its airline industry from financial crisis and also took away the burden from the taxpayers to some extent but didn’t solve the problem completely. The entry of new foreign airlines had resulted in lower fares and the opening of new routes services to scores of cities. However, after 25 years of the act passed, further deregulation is required which means allowing foreign ownership of U.

S airlines (“The Airlines industry”, 2000). The system of allowing foreign countries to operate in the country has become a necessity for the United States. Today, much of the world aviation market is shared between several large global alliances, including KLM/NorthWest, Atlantic Excellence alliance, STAR, and the British Airways / American Airlines alliance which also includes Canadian Airlines and Qantas (“The airline industry”, 2000). However, the U.S has restricted the entry of foreign airlines in its domestic market.

There are various myths and insane reasons of the U.S government for not allowing foreign ownership of its airlines. The federal government believes that the foreign airlines don’t have the same safety standards as well as security standards as the U.S airlines. Secondly, they will take away the jobs from the hands of the Americans and replace high paying jobs with low paying jobs. Thirdly the foreign airlines will choose to fly only on the major routes which will earn them maximum profits and the revenue thereby earned will be carried offshore.

This will hamper the U.S economy and will not proof fruitful (“Airlines Deregulation”, 2003). Although the arguments put forward by the federal government for limiting its aviation industry shows its concern for the people but the present circumstances of the U.S airlines can be improved only through further deregulation. The result of excessive protectionism was seen in Canada in May 2011. Air Canada, the only major airlines existing in Canada was declared bankrupt due to its government’s closed air policies.

It was not only a loss for the whole economy, the government of Canada but its natives as well (“Airlines Deregulation”, 2003). So what will the U.S government gain by not deregulating its airlines? The opening up of the aviation industry to the foreign world will inject capital and competition into the aviation market. This will help in lowering the airfares and improvisation of the services especially from feeder routes to destination overseas (Button, 1998). “Allowing foreign investors to buy into US airlines, or to start their own new carriers, would bring a badly needed breath of fresh air - and fresh money - to a failing industry.

” For example, the Australian government gained tremendously by allowing Sir Richard Branson to start a new airline named Virgin Blue in its country. The government made an agreement with Sir Richard that the airlines will be incorporated in Australia under Australian law, will employ only Australians and will also have an Australian board of directors. The outcome was that the country gained extremely from it and at the same time the major domestic airlines Qantas remained unharmed from it (“Airline Deregulation”, 2003).

Although the crisis in the U.S airlines is a matter of concern and needs to be solved as soon as