Choosing Contraction versus Consolidation
Frans C. Verhagen, M.Div., M.I.A., Ph.D.,
President, SAVIA Associates International
Of the merger agreement, Delta CEO Richard Anderson said, "Our need to respond to the pressures of dramatically rising fuel costs and a softening U.S. economy drove us to take a closer look at all options to strengthen our future."
I wonder whether he has seriously looked at a planned contraction strategy in which he not only takes account of fuel prices and the US economy, but also the slowing global economy and the requirements of the ever deepening climate crisis. Did he consider the direction of the aviation industry within a long-term sustainable transportation plan for the US? Is he only thinking of “our future” as the future of Delta or the future of the US aviation industry or even the future of the global aviation industry? These questions are important because his merger not only substantially impacts on the domestic industry and the US society, but also on the global industry and the world’s social system.
The argument being raised here is that a planned contraction strategy by Delta and other airlines might be preferable to the proposed consolidation, and future ones by other airlines. This is an important argument, because Congress and the Justice Department still have to make up their minds on the Delta/Northwest merger, and because other airlines may rush to merge. They may consider this for the two reasons quoted above and the calculation that a Justice Department in a new administration may be far more reluctant in approving large mergers than the Bush Administration.
What is a planned contraction strategy?
Contraction is taking place all over the industry by the reduction of air services and capacity, the shutdown of airlines, etc. These contractions are considered to be undesirable because the industry, like other industries, is still based upon the growthism syndrome where bigger is always considered better. Planning a contraction strategy counteracts this growthism syndrome and places sustainable development of the industry with qualitative improvements central to the industry’s future. Transitioning to sustainable aviation, therefore, means considering reduction of quantitative growth or contraction as socially and ecologically desirable. Focusing on qualitative growth becomes a new strategy that takes into account not only fliers, but the well-being of domestic and global societies and the physical environment which is mostly threatened by the ever deepening climate crisis.
Planning a contraction strategy means using an airline’s transportation experience and resources in a new way. It raises questions of determining its role in a long-term surface transportation system where aviation is integrated for long distances, questions of investments in surface transportation modes, questions of advocacy of an efficient and fully integrated transportation system, questions of taking a position on an international economic system that enriches the few, impoverishes the many and endangers the planet.
Planning for a contraction strategy acknowledges the thermodynamic fact that air transportation is 4-10 times more energy intensive than other modes of transportation and that its GHG emissions are, therefore, also 4-10 times higher. Notwithstanding major improvements in fuel technology and aerodynamics over the last 40 years, emissions have reached a plateau where further small efficiencies will not face up to the challenge of 90% reduction of emissions by 2050 as calculated by British journalist Monbiot. Thus a contraction strategy planner will acknowledge that stopping growth is not only necessary, but that contraction is necessary. Planning such contraction rather than having pure market forces determine the outcome is a human and ethical thing to do.
Planning for a contraction strategy also includes a strong involvement in the federal transportation legislation, not as advocates for one’s own strictly defined self interest, but as transportation specialists who are able to see the larger domestic and global social and ecological challenges. Why is it that both air and surface transportation funding are still separate rather than integrated? Why is there no long-term sustainable master plan for transportation that integrates all modes of air and surface transportation?
The citizen sustainable aviation movement in the USA, with which SAVIA closely collaborates, has proposed a $300 billion 15 year program to make that integration possible. The funds for this IITS Initiative would not only enormously improve the nation's infrastructure and create millions of real and good-paying jobs; they would also result in the aviation industry becoming smaller in a socially and ecologically sound way.
How is an airline or an airport or airframe manufacturer to plan for such planned contraction?
Together with the various modes of surface transportation, they can start realistically planning, not for the next quarter or year, but for the next thirty years. If done on a long-term basis, the urgency of the ever deepening climate crisis is to be considered first. Scenarios abound about the Earth's climate, but one of the major conclusions of the IPCC is that reduction of a magnitude of 80% by 2050 is necessary. James Hansen and associates recently have argued that even greater reductions are needed in order to arrive at 350 ppm target of CO2, "if humanity wishes to preserve a planet similar to that on which civilization developed and to which life on Earth is adapted". Climate change negotiators in Thailand are very carefully scrutinizing the emissions of air transportation with its still expansionistic tendencies of which the consolidation trend is one part. In other words, minor advancements in fuel and aerodynamics are inadequate, the industry has to contract and, hopefully, in a humane and planned way. It would be in the interest of the aviation industry to join the US citizen sustainable aviation movement in signing on the IITS Resolution that can be found at www.susaviation.com and www.us-caw.org
Planning for a contraction strategy is to be based on discussion, debate, dialogue. This dialogue should not only take place at the executive levels of corporations, but with all the stakeholders of this and other mergers. It is counterproductive for Mr. Anderson of Delta to pursue a divide-and-conquer strategy with the pilots. He entered into a new contract with Delta pilots, which gives them a raise and a 3.5 percent stake in the new company, and giving him more flexible work rules with which to run a combined airline. The Northwest pilots were left out. Their union chief, Dave Stevens, said the group "will use all resources available to aggressively oppose the merger." These conflicts happen if people's rights are trampled on. So, part of this planned contraction strategy is a well-planned participatory decision-making process.
In this dialogue the issue of re-regulation is a most important issue, because aviation and surface transportation are part of the essential infrastructure of any government. Maynard’s article in the NY Times of April 17 entitled “Did Ending Regulation Help Fliers?” is a journalistic approach which focuses on fliers without considering the larger US public and society, let alone considerations of global impacts. I am suggesting that Congress establish SATCO, the Sustainable Aviation Trustee Council which would function as a “trusted broker”. It would consist of three of FAA representatives, three members of Congress, three representatives of the US citizen sustainable aviation movement, two international representatives, one of ICAO, one from WMO. Given the domestic and global economic downturn, the ever deepening climate crisis, such a new institution will be far better equipped than a revised Civil Aviation Board developed within a very limited planning framework, because SATCO places the industry in the realistic economic, climatological, and even ethical contexts of the 21st Century.
In conclusion, contraction in the airline industry and a decrease in the growth projections due to the permanent increase in fuel costs during this peak oil period and many other reasons may not be a bad thing at all. As a matter of fact, it may a blessing in disguise if the contraction is planned wisely, i.e. both strategically, ethically and tactically.