'Land of the free ride' told to clean up act

LONDON - Sir Rod Eddington, the outgoing chief executive of British Airways, has launched a blistering attack on the United States, accusing it of distorting airline competition, blocking the move to open skies and propping up loss-making carriers for the sake of "political vanity".

In his last set-piece speech before he hands over to Willie Walsh, Eddington charged the US with hypocrisy by ignoring the free-trade lessons it imposed "with an almost pitiless ferocity" on Third World markets when it came to its own chronically loss-making airline industry which it had kept alive with huge state support.

"America - land of the free - is turning itself into the land of the free ride," he told an Aviation Club lunch.

"In the last four years, the airlines have soaked up US$15 billion ($22 billion) to US$20 billion of public subsidy and loan guarantees.

"They're operating in protected markets, they're hoovering up public funds and still they can't make a profit. They are dumping capacity on the North Atlantic, distorting competition and pricing for cash.

"But in what way does that surprise us? If 50 years of post-war economics has taught us anything, it's this: state subsidies preserve bad habits.

"America would do itself a favour by going back to the long-lost principles of real and honest competition."

Four of the six big US flag carriers are in Chapter 11 bankruptcy protection and, collectively, the US airline industry lost US$9 billion last year.

Eddington said the world had 300 airlines but, in reality, needed only 10 or 20.

Easier rules on takeovers and genuine open skies would reduce the number of carriers, but the US had sought to block both while propping up its own airlines.

The BA chief said he found that "offensive" because it was stupid, rewarded bad habits and inefficiency and drove out good money to be replaced by bad.

The comments are some of the most outspoken in Eddington's five years at the helm of BA and are likely to draw an angry response from the US Administration and its aviation industry.

His speech comes as US and EU officials prepare to resume talks on liberalising air services between the two continents, although few observers expect a breakthrough in the long-running open skies negotiations.

Eddington attributed the US stance in part to the shock of the September 11 attacks on New York and Washington which had done "something serious and worrying to the American mind".

In contrast, the EU had turned out to be "on the side of the angels".

Airlines had gone to Brussels rattling their begging bowls and had been shown the door - with the "shaming exception" of the Italian flag-carrier Alitalia which "should be out of business".

- INDEPENDENT