Bethune: The US Airline industry makeup needs to change. Is he right?

Gordon Bethune - Boeing exec turned Continental saviour turned Aloha Chairman and Industry Analyst - recently sat down with the Houston Chronicle's Bill Hensel. See the interview here: http://www.chron.com/disp/story.mpl/business/5546668.html

So is he right? If not then what?

My answer is: Yes and No.

Yes it needs to change and No the big mergers are not the answer. In fact quite the opposite. We need MORE competition not less.

So IF the US Congress is listening here is a 6 point manifesto for such an industry make up change:

1. Remove all ownership restrictions. Allow foreign ownership and control.
2. Remove all 5th, 6th and 7th Freedom constraints and have open skies into and out of the country effective immediately.
3. Open 7th and 8th Freedom rights provided that the airlines can show an economic return. IE no dumping. You might want to wait a year before implementing this.
4. Implement a true Carbon Footprint policy - comprehensive that covers limits on emissions and promotes trading against a global metric.
5. Implement open airport pricing including freeing the airports (not the Feds) to charge Peak/Off Peak pricing
6. Stimulate new entrants through a domestic program similar to the ExIm Bank for foreign purchasers.

Put this in place and you will have a free market environment that will stimulate low cost entrants and competitive market pricing. Then it doesn't matter if you have big or small airlines.

And before I am hoist on a petard with cries of "Naive" I would encourage the US to pay close attention to the European model. Effectively this is what they have. True it has been a very bumpy road to get there but essentially it is mostly now in place.