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Time to nationalize the airline industry?
American Airlines declares bankruptcy, and some analysts argue that passengers would benefit if the government took over the big carriers
 
American Airlines is hardly the first big carrier to go bankrupt.
American Airlines is hardly the first big carrier to go bankrupt.
Richard Michael Pruitt/Dallas Morning News/Corbis

When American Airlines' parent company, AMR, filed for bankruptcy protection this week, it marked the 100th time since 1990 that an airline company asked a court to keep its creditors at bay while it reorganized and cut costs. It was the 189th bankruptcy filing in the industry since the economic deregulation of the airline industry in the late 1970s, according to the Air Transport Association. AMR said it had no choice, because it couldn't compete with rivals that have already used Chapter 11 protection to help them cut salaries and other costs. Would the airline industry be more stable if it was nationalized?

Yes. We should nationalize big carriers: Ideally, the free market would rein in the airline industry, says Jeff Macke at Yahoo! Finance. But despite the 1970s deregulation, which scrapped government control of prices and routes, airlines are still subjected to "draconian" and inefficient rules. If mixing government and private companies doesn't work, and the government won't leave companies alone, why not "give nationalization a shot"? Amtrak is no prize, but at least "my train runs on time" — unlike my flights.
"American Airlines files for bankruptcy: Is nationalization next?

Nationalization will only make matters worse: The last thing we need is nationalized airlines, Reuters' Felix Salmon tells Yahoo! Finance. "There's not a good nationalized airline anywhere in the world, and they cost a fortune to taxpayers." What you want is a truly competitive market, where instead of having a few giant legacy carriers with a lock on all the good routes, you have "lots and lots of private airlines which just fly higgledy-piggledy all over the world."
"American Airlines files for bankruptcy: Is nationalization next?"

Well, deregulation certainly didn't help: The 1978 federal deregulation act "unleashed market forces on the hitherto closely regulated industry," says The Economist's Cassandra blog. In theory, that should have worked wonders. "But I have to admit that flying in America is a bit like being on Greyhound bus — though often with less service." Plenty of carriers in the Middle and Far East manage to stay aloft with "wonderful service." Maybe Western airlines can figure out their secret.
"American Airlines succumbs to the industry's head-winds"

Relax. This is just the way this business works: American's bankruptcy filing is no big deal, travel industry analyst Henry H. Harteveldt tells The New York Times. "Except for Southwest, there isn't a single airline that started before deregulation in 1978 that has not gone through bankruptcy," and those that have gone through it in the last few years have remained in business. AMR's troubles won't trigger any big change — "airlines do a better job at filing bankruptcy than delivering luggage."
"How does the American Airlines bankruptcy affect you?"

 

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