All Commentary
Monday, February 1, 1965

Flying Socialism

Mr. Husbands is with Dean Witter & Com­pany in San Francisco.

It stands to reason that persons who want certain things accom­plished will get the job done more promptly and efficiently than it could be done under compulsion—that competitive private enterprise in a free market is more efficient than government operation and control. But this is a difficult mat­ter to prove, for governments sel­dom enter a business activity with­out claiming a monopoly—that is, passing a law to forbid competi­tion.

The international airline traffic situation affords a rare opportun­ity to compare private enterprise with government operation in the same competitive area. Here we may observe various privately owned and managed airlines oper­ating side by side with government lines, using similar equipment, flying similar routes, and offering similar services.

Most of the airlines serving within the United States or orig­inating here are privately owned and operated, whereas nearly all of the major airlines from other countries are under government ownership and control. For the most part, these major trunk lines, whether privately or governmen­tally owned, use similar equipment and must be assumed to face simi­lar costs for depreciation, replace­ment parts, and fuel. The remain­ing major cost factor, and the one that might be expected to show the greatest variation between businesses managed for profit and those under political management, would be the amount of labor used. The labor efficiency of handling passenger service, overhaul, pro­motion, administration, and flying operations can readily be measured in terms of the number of revenue passenger miles flown per em­ployee by the various airlines.

Government Lines vs. Private Lines

A striking contrast between two airlines operating over simi­lar international routes with sim­ilar equipment is afforded by Brit­ish Overseas Airways Corporation (BOAC) and Pan American Air­ways. Both are characterized by comparatively long flights per pas­senger, averaging 3,200 and 1,800 miles respectively. Pan American is the larger of the operations, with slightly more than twice the number of aircraft operated by BOAC. In 1963 Pan American flew more than 2.6 times as many rev­enue passenger miles (8,069,397,­000) as did BOAC (3,023,470,000), but with only 20 per cent more personnel.

A comparison between Air France and TWA shows the latter providing nearly 21/2 times the number of revenue passenger miles per employee as did Air France in 1963.

KLM, operating 57 aircraft in contrast to 50 for Northwest Air­lines, showed only 101,968 revenue passenger miles per employee compared with 388,626 for Northwest.

Lufthansa, Swissair, and SAS all averaged about 135,000 revenue passenger miles per employee, whereas National, Continental, and Western, with reasonably similar equipment and flight conditions, averaged from 390,000 to 461,000 revenue passenger miles for each employee. In other words, accord­ing to these figures, it takes ap­proximately three government em­ployees to do the work of one employed privately under the prof­it motive.

It may be argued that wage rates are lower for foreign air­lines, and that the number of em­ployees is not a fair measure of the airline’s efficiency, but it is noteworthy that flight crew per­sonnel number about the same for privately owned airlines and gov­ernment owned, and that U.S. air­lines operating internationally em­ploy mostly foreign nationals in their overseas ground operations. In any case, to the extent that an airline has more personnel than needed to do the job, it is sacrific­ing the standard of living, not only of those extra employees, but of all consumers in the economy.

Private Lines Would Reduce Fares

 The excuse for nationalization of industry is often expressed in terms of “national interest” or “for the benefit of the people.” It is ironic, but predictable, that the recent request for rate reductions of almost 30 per cent on the North Atlantic run was made by Pan American Airways and TWA. Equally predictable is that their government-owned competitors would argue to hold existing rates, as they contemplated the increased red ink they would show if these rate reductions were installed. The socialist insists that his ability to plan relieves his world of the anarchy of the free market, all to the benefit of the people. Yet, in this one area of the transporta­tion industry where we can make a direct comparison, we find the government-owned airlines rela­tively inefficient. Further, the in­dications are that, without the competition from free enterprise, the government airlines would charge even more for their serv­ices than they do now. Would that these lessons could be learned by all advocates of socialized produc­tion.

Could Be

“A reason why the Russian communists are increasingly adopt­ing free market practices in their economy,” suggests Dean Russell, “is that they’d rather be fed than Red.”