Flightlines 4: Clear Skies Over Europe
Lufthansa soars with ITA acquisition, while JetBlue stalls against American regulatory headwinds.
This week’s issue of Flightlines comes on the heels of the European Commission’s approval of Lufthansa’s acquisition of ITA Airways. We have a lot to say about this and the global regulatory climate at large, but this week’s issue will be a bit lighter on the editorial, with a more comprehensive round-up of the week’s news.
Editor’s note note
As Flightlines gets off the ground, the format of each issue is subject to evolve. The primary goal of this publication is to give our readership an entertaining perspective on the happenings in the world of aviation while also providing valuable information. It is unlikely that Flightlines will be the first outlet to break news—commercial aviation is a global industry and news happens almost without cease throughout the world. The authorship, though enthusiastic, is not a working professional in this industry. As such, you can expect that the content will always be approached professionally, but the insights and analysis within might be a bit elementary.
Editor’s note
It’s a sad day stateside when the Eurozone seems to have a less oppressive business climate than America. What else can one conclude after watching the JetBlue-Spirit merger die on the vine in America, while Lufthansa was able to freely acquire ITA in Europe. Flightlines is of the opinion that government exists to facilitate business, and not the other way around. Unless there is significant public danger or distress that would arise from their activities, businesses should be left to their affairs without interruption, regulation, or undue taxation.
The Department of Justice made the argument in the case of the JetBlue-Spirit merger, that “the consumers that rely on Spirit's unique, low-price model would likely be harmed.” While consumer protection is a seemingly valiant goal, they fail to realize that Spirit’s business model is not viable and without this merger, the company will fail to exist in a matter of years. Whether or not consumers rely on Spirit’s “low-priced model” is irrelevant if the company ceases operations. In this case, everyone loses.
Government exists to facilitate business, and not the other way around.
The government’s oversight responsibilities should not be used for political opportunism. Each new merger or acquisition shouldn't be an opportunity for grandstanding politicians to undermine American companies (groups of tax-paying citizens). Political rhetoric often aims to victimize companies, suggesting that corporate greed is the primary issue driving the world’s economic problems, such as inflation.
Although greed is immoral, it is not constitutionally prohibited, and there should be space for corporations to operate with a profit-centric focus. Imagine balancing the fiduciary duty to shareholders with the government's expectation (though not a written mandate) to provide equitable value for your customers. This conflict of interest exists in a unique context, often unaware of market forces. An appropriate analogy (for an airline blog) might be that of passengers flying through the skies, blissfully unaware of the forces of gravity acting upon them. Despite this lack of awareness, gravitational forces are no less real and no less present; circumventing these rules can lead to disastrous consequences.
So, while businesses should expect to be free from undue government interference, they should not expect the government to rescue them when times are tough. This is where the market plays its role. Strong companies that balance value with operational and financial discipline will become sustainable, while those that neglect one side of this balance will slip out of the market. The invisible hand can be swift and decisive.
During the coronavirus pandemic, the airline industry in the United States received over $50 billion in bailout money. What exactly were they being bailed out from? The government had decided that international travel was no longer a necessity, and most businesses were not deemed 'essential.' Those that were essential had to complete a series of onerous and frivolous qualifications to prove compliance. Needless to say, this was not an ideal climate for commerce, especially for air travel. Almost overnight, the number of scheduled flights evaporated, as did the revenue expectations of the carriers. The moral of the story is that if the government purposefully disrupts your business, you might expect a handout. However, if you expect a handout, you’ll open a door that is nearly impossible to shut. Stock buy-backs, dividend or price increases, and any typical corporate financial activity will be viewed through a lens of corporate greed: 'Why do they need to make any money? We’ve already given them billions!'
Being in charge is truly what the regulatory state wants. Each new subsidy, bailout, or court-terminated merger is a claw dug deeper into the hide of the free market's carcass. The entity responsible for operating the DMV also believes that, if it were in charge, it could run the national airline system with more ease and efficiency than these greedy corporations—just like they do in Russia.
For perhaps the first time in recorded history, let regulators in America look to the European Commission’s Competition Committee as a model. With the Competition Committee’s approval, Lufthansa was able to complete a €350-million capital investment in the Italian flag carrier. Flightlines will surely be back in the future to report on how each of these deals served their consumers. What do you think? Will the DOJ’s termination of the JetBlue-Spirit deal preserve ultra-low-cost fares? Will the EC’s approval of Lufthansa-ITA end low fares for European travelers? We shall see! On to the news…
In the news
The latest and most impactful stories shaping the world of commercial aviation this week.
July 14th, 2024
July 13th, 2024
Wizz Air Hub At Debrecen International Closed For Urgent Repairs
Delta Boeing 757-200 Diverts To St. Louis After Pressurization Issue
40% Yearly Increase: Etihad Has Carried 8.7 Million Passengers In 2024
Boeing Initiates 777-9 Certification Flight Trials With The FAA
July 12th, 2024
July 11th, 2024
Saudi jet’s landing gear catches fire during touchdown at Peshawar airport in Pakistan, no injuries
Delta Air Lines announces June quarter 2024 financial results
July 10th, 2024
American 737 Rejects Takeoff At High Speed Due To Burst Tires
Breeze adds 2 new cities, 5 new routes to popular winter destinations
Eels Break Free From Aircraft, Flood Vancouver Airport Apron
July 9th, 2024
July 8th, 2024
July 7th, 2024
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Thank you for reading. Flightlines looks forward to bringing you more insights and updates in the world of commercial aviation next week- same bat time, same bat channel.
Until then, safe travels and happy flying.