Airline industry grows up

One day in 1958, someone in the sales department of SAS, the state airline jointly owned by the governments of Norway, Sweden and Denmark, came up with what he thought would be a clever line to attract more high-fare business travelers to the airline.

“On our planes you won’t find rubbery indigestibles wrapped in cellophane,” the unknown author wrote in reference to SAS’s supposedly tastier sandwiches in a sales letter to prospective clients.

Eventually a copy of the letter ended up in the hands of Trans World Airlines (TWA), a major U.S.-based competitor of SAS’s on the North Atlantic routes — and it was SAS that ended up with a very expensive case of indigestion.

Trans World complained to the International Air Transport Association (IATA), the global regulatory body for the world’s airlines, about SAS’s boastful letter. IATA regulated not just where airlines could fly to and how much they could charge; they even regulated in-flight service.

The dispute between SAS and TWA, and complaints from Pan American about the large sandwiches being served by four of its European rivals, are now remembered as the “Great Sandwich War” — and still sometimes recalled by historians as one of the absurdities of the airline industry’s pre-deregulation era.

The result was a two-day IATA conference in London that deemed that member airlines’ Economy Class sandwiches must be cold, made largely of bread, unadorned, self-contained and not filled with anything too fancy, such as lobster or caviar.

And SAS, was slapped with a $20,000 fine for slurring its competitors — equivalent to more than $150,000 in 2010 dollars.

It was TWA’s turn to be the aggressor in the 1965 Movie War, when other airlines complained that the U.S. airline’s expensive new in-flight movie system gave it an unfair advantage. After a short ban on movies, the dispute was resolved in 1966 when IATA ruled that in-flight movies were acceptable as long as passengers had to pay $2.50 U.S. (equivalent to nearly $17 today) to rent the required headsets.

The industry’s childish antics would continue for more than a decade more. By the late ’70s, however, it was time for a change.

Governments that had been flush with cash during the post-war booms of the ’50s and ’60s found themselves forced on to austerity budgets in the ’70s by weak economic growth and soaring inflation. The cash infusions required to help government-owned airlines replace the Boeing 707s and DC-8s that were nearing the end of their service lives, and to subsidize unprofitable routes for political reasons, were unwelcome expenses that governments were eager to be rid of.

On top of that, the public was clamouring for lower fares.

That set the stage for governments to get out of the airline business by deregulating the industry, privatizing government-owned airlines and signing “open skies” treaties with other governments. Once the U.S. deregulated its airline industry in 1978, it was only a matter of time before Canada followed course — which we did in the ’80s.

That set loose a 30-year hurricane of changes — mergers, fare wars, start-ups, bankruptcies, new job opportunities at some times and massive layoffs at others.

The toll could be seen by looking at the names of the airlines that served Winnipeg in 1978, the year that deregulation began in the U.S.: Air Canada, CP Air, Transair, Wardair, North Central Airlines, Northwest Orient and Frontier Airlines.

By 1990, all but Air Canada and Northwest had disappeared through merger or bankruptcy.

There were years of chaos left to go. Various newly formed airlines came and went at Winnipeg International Airport throughout the ’90s and 2000s: Royal Airlines, Greyhound Air, Vistajet, Canada 3000, Jetsgo and Zoom, just to name a few.

Fifteen years ago this month, on Feb. 29, 1996, a quirky Calgary-based startup called WestJet took to the skies over Winnipeg for the first time. Many (myself included) figured that it too would eventually fall victim to industry carnage.

Despite a rocky start, WestJet proved us doubters wrong through a combination of skillful management and good luck. By 2010, it was approximately the same size as the former Canadian Airlines International in terms of the number of passenger-miles flown and the size of its fleet.

As WestJet’s 15th anniversary approaches, a strange sense of normalcy has settled in at Winnipeg Airport.

WestJet itself has shed many of the quirky attributes of its early days, such as the singing flight attendants and the pass-the-toilet-paper-roll games, though the flight attendants’ name tags still have smiley faces on them. Now it does more “middle-aged airline” things, such as signing interline and code-sharing agreements with Delta and Air France. (Will membership in the SkyTeam alliance be next?)

Air Canada will always get its share of barbs as the country’s biggest airline. But it is a profitable airline, as its 2010 net income of $107 million suggests, and has had some success in convincing U.S. travelers to connect through Canada instead of through U.S. hubs on their way to international destinations, as the Winnipeg Free Press reported a few days ago.

And despite ongoing economic trouble in the U.S., both Delta and United-Continental announced today that they were profitable in 2010 and would be paying out profit-sharing bonuses to their employees.

After 30 years of post-deregulation turmoil, which followed 30 years of pre-deregulation bunfights over trivial issues like sandwich toppings, the airline industry seems to have finally found some degree of stability. It has finally grown up.

The trick now will be to make the stability last.

Was airline deregulation good or bad in your opinion? Share your thoughts below.


On a different note, most of us born-and-bred Manitobans were quite pleased to see headlines such as “Warm weekend weather” in the Winnipeg Sun and “A few more days of warmer weather in store‎” in the Winnipeg Free Press. But our pleasant mid-winter respite from the usual brutal cold can be a newcomer’s shocking introduction to what we consider “warm” around here, as I learned this weekend.

Please tell me they are joking when they say this is a warm day in Winnipeg,” a friendly recent newcomer from the U.K. begged me this weekend. I reassured him that it wasn’t actually warm, but still very mild for this time of year, hoping that it would ease his shock at learning that what would be called “extreme cold” in his homeland is sometimes called “warm” here.

So, if there are any meteorologists or other weatherpeople reading this, now you know: be careful how you use the word “warm” at this time of year, as it’s giving some of our new neighbours from abroad a dreadful fright.

 

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About theviewfromseven
A lone wolf and a bit of a contrarian who sometimes has something to share.

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