Air Berlin’s insolvency and the quest for efficient airlines

Air Berlin filed for insolvency after its largest shareholder, Abu Dhabi-based Etihad Airways, withdrew its support. Still, the German airline will continue flying for at least three months after the German government stepped in to bail it out.

The complexities of the airline market are too intricate to properly discuss here. Yet your correspondent misses so many airlines that have disappeared from the airport landscape: Pan Am and its Boeing 747s, Braniff and its colorful planes. So he naïvely asked his Economics teacher, Michael Kuczynski, about the very fickle industry.

Kuczynski laughed. The only way for an airline to be consistently profitable would be to fly fleets of pilgrims from Indonesia to Mecca every day at market fares. That impossible were the economics of the airline market.

This was 1995 but that’s how the numbers apparently still work. Yet government interventions to rescue so many airlines are not only motivated by politics or save jobs that may cost them votes. It’s more basic than that. Airlines are essential to modern economies. That market forces do not always make them commercially viable lands this dilemma at governments’ door.