National Interest vs Protectionism
One of the issues that has been historically synonymous with commercial aviation is protectionism. While most of the global trade has seen a departure from protectionism, the air transportation market is still heavily regulated and protected. One reason for this is the fact that aviation is so closely related to national interest – which makes these matters very sensitive for most governments. But is protectionism the right tool for national interest ?
Many states seem to believe that a restrictive aviation policy helps their national carriers, thus preserving the national interest. But is this always true ?
Let’s take the classic example of Australia and Canada – two very similar countries in many aspects, but the national aviation policy.
The two countries have a comparable land mass, although Australia has a smaller population. Canada operates on a tight and restricted aviation policy while on the contrary Australia is far more relaxed. Let’s have a closer look on the aviation industry of these nations.
Major Airlines
Australia : 5 ( Qantas, JetStar, Virgin Blue, Tiger, V Australia )
Canada : 2 ( Air Canada & AC Jazz, WestJet )
Although Australia has a large number of local carriers, the government has been very liberal in allowing foreign carriers in. This has helped to develop a number of airports in smaller Australian cities into international hub status, such as Perth and Brisbane, which would have otherwise been ignored. This has resulted in increased traffic to airports, increased tourist arrivals to Australia, and lower fares for Australians.
The most interesting factor however is that, in contrast to Canada’s loss making national carrier, Air Canada, – the Australian national carrier, Qantas, and almost all other Australian carriers have regularly been profitable. Has protectionism helped or hurt ?
National Career
Perhaps the best statement on this stance comes from Azran Osman-Rani, CEO AirAsia X
“Malaysia Airlines is not national interest. National interest is the Malaysian economy. “
And this statement applies everywhere.
Two of the world’s most successful legacy carriers, Singapore Airlines and Emirates, fly from hubs that are unrestricted to other carriers. This liberalism has not crippled these airlines, but instead helped them.
For almost every destination that Emirates and SIA flies to, from their respective Dubai and Singapore hubs, there are alternative airline choices. Yet Emirates and SIA are two of the world’s most profitable airlines.
Why ?
The competition has triggered all these airlines to become efficient and to take care of their profitablity. It triggered them to innovate and create a winning proposition for themselves. The companies became non-reliant on subsidies and instead became drivers of national growth.
The end result was far better connectivity to their respective states and great benefits to the economy.
The nations need to understand the modern reality in aviation. Hub and spoke and sixth freedom are here to stay. The hub that could provide better options wins. In face of this, the only answer that benefits both the national carrier and national economy is to open the market for competition. This will allow increased economic benefits from the increased connectivity and an efficient national carrier that is nomore reliant on subsidies.
An often ignored side effect of protectionism is that it will really take things away from national interest. Increased protectionism and inefficient practices will force other airlines to switch to better, and more open hubs. Lack of connectivity caused by protectionism will cause global investors to relocate their regional headquarters to better countries. The lack of adequate transportation facilities will hurt the local exporters. The list goes on..
The Government’s Duty
One factor many officers of protectionist states raise is, ‘ the market is not underserved ‘. While this could be true to some extent, does this mean an air transport market do & should stay the same in size forever ?
Historical figures serve to the proof that the entry of a new airline always increases the market size. Why not let other carriers to come in and increase the market size, which will benefit your national economy ?
The conflict herein lies in understanding a government’s responsibility. When the government is not only the policymaker of national aviation, but also the shareholder of a national airline – it begs the question of which side to take. Many governments tend to make the choice of ‘shareholder responsiblity’ and move to protectionism, which in fact comes at the cost of national economy, thus ironically destroying the national interest.
In many of the nations with liberal aviation policies, a surge in national economy could be seen. The increased connectivity from aviation liberalism has, triggered the national carriers to become efficient & profitable, increased tourist arrivals to the country, increased investor attraction and brought a lot more benefits.
A level playing field and mutual benefits to two nations are acceptable, but these matters should never reach extreme levels. The reality is, protectionism nomore helps an economy in this 21st Century. Instead, it damages the economy. Nor does the protectionism help your weak national carrier to emerge profitable.
This proves that the true national interest in fact lies in opening up the air transport market, not in restricting it. Yet many countries still appear to believe in the myth that a restrictive air transport policy helps national interest. It’s high time to debunk the myth..
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