Two key questions will define the future shape of commercial aviation. First, what will be the price of oil and how long will it be commercially viable to extract? Second, will green concerns force air travel to be reinvented?

“The modern airplane creates a new geographical dimension. A navigable ocean of air blankets the whole surface of the globe. There are no distant places any longer: the world is small and the world is one.”
—Wendell Willkie, Republican nominee for the 1940 US Presidential election

For a brief period during the 1970s it seemed supersonic airliners might leapfrog all competition and emerge supreme. However, their challenge faded swiftly with manufacturers abandoning the craze for speed to concentrate on improving performance and reliability of airliners. Airlines, too, were content with aircraft limited to high subsonic speeds, perhaps the larger the better.

Competition at Last
Hallmarks of commercial aviation as we know it today were put in place in the 1960s and 1970s. The twin-engine B737, Boeing’s ubiquitous narrow-body airliner, entered service in February 1968. To date, over 6,000 B737s have been delivered and 2,000 orders are on hand, making it the most-produced jetliner in history. The four-engine Boeing 747, the first widebody commercial jet, and arguably the world’s most recognisable airliner, first flew commercially in 1970. It was expected to be rendered obsolete by supersonic airliners, but till date, around 1,500 B747s have either been built or are on order.

In December 1970, Airbus Industrie, a consortium of European aerospace companies, was set up and provided direct competition to Boeing for the first time. The Airbus A300 was launched in 1972 as the world’s first twin-engine wide-body airliner. Its famous successor, the Airbus A320, commenced airline operations in 1988, pioneering the use of digital flyby-wire flight control systems. With more than 3,800 aircraft built, the A320 family is second only to the B737. The A340 was launched in June 1987 as a long-range companion to the short-range A320 and the medium-range A300. The contest between Boeing and Airbus seesaws from year to year. Other companies, like Embraer and Bombardier Aerospace, avoid direct competition with the two giants, preferring instead to focus on regional jets.

In 1973, a new US airline changed the face of air freight business. Fred Smith, a young entrepreneur, believed that combining passenger air traffic with freight, as the regular airlines were doing, would not work. Instead, he established a dedicated air freight line called Federal Express, its USP: nextday delivery, a service he guaranteed.

Deregulation & Low-Cost
For over half a century, airlines worldwide were heavily regulated and competition was mainly in standards of service, rather than in fares. In many countries, airlines were stateowned and became potent symbols of national pride. Private airlines were often prevented from entering the market. Even though US airlines were privately owned, they conspired to prevent new competition emerging. However, in 1978, the US Congress approved the Airline Deregulation Act, which allowed airlines to choose their own routes and set their own fares. From this point onward, they would live and die by the demands of the marketplace.

Biggest winner was the passenger, since fares dropped by around 20 per cent and many millions who had never flown before now became regular fliers. Americans showed the world how to do without rail and bus travel by using a car for up to a few 100 km and catching a jet for everything else. Only over the last decade or so have green concerns put such extravagance under a cloud. The US experience showed that profitability in a deregulated market can be shaky. Some of the legacy carriers, like an already weak Pan Am, did not survive. Most of the poorly established new entrants fared equally badly. The 1980s also saw the low-cost airline model take hold in America, as carriers led by Southwest set a trend that would later spread to Europe. The 1990s witnessed intense consolidation—code-share agreements led to franchise deals and ultimately created the strategic global alliances that we know today. Since deregulation in 1978, over 200 US airlines have merged, been taken over, or gone out of business.

It was not till the early 1990s that deregulation of the European Union airspace commenced. By 1997, any EU airline was able to fly anywhere within the single market. Non-European players, mainly North American carriers, began to compete in markets previously reserved for national airlines, putting some of the latter in dire financial straits. The shift towards ‘budget’ airlines on shorter routes became significant. Airlines such as EasyJet and Ryanair grew at the expense of the traditional carriers. National airlines such as Aer Lingus (Ireland) and British Airways were themselves privatised. During the 1990s, ‘open skies’ agreements, which deprive governments of many regulatory powers and open up international routes to further competition, also became common.

India had its own experience of deregulation. After the airline industry was nationalised in 1953, Indian Airlines and Air India operated as monopolies, while private carriers were not permitted. The industry did not see much growth and standards of service and efficiency slipped considerably. However, with the entry of private players in the early 1990s the scene was transformed. Jet Airways, Sahara Airlines and other operators launched a revolution in the sky. But it was Air Deccan that was responsible for a paradigm shift. In 2003-04, it slashed fares dramatically, rivalling upper-class train tariffs on key sectors, and bringing air travel within the reach of everyone. Other airlines followed suit, creating fierce competition for each passenger.

The surging popularity of air travel following deregulation and the launch of low-cost airlines worldwide, rapidly increased the volume of flights and stretched airport capacity to the limits. In the US, for instance, traffic topped 600 million passengers per year in 2001—a four-fold increase over three decades. On September 11, 2001, however, terrorists seized control of four airliners and carried out unprecedented attacks on New York and Washington. The nation’s entire fleet of commercial aircraft was grounded for two days. In the months that followed, passenger travel decreased sharply and took a couple of years to return to pre-September 11 levels.

This illustrated the inherent fragility and vulnerability of the air transport business—terrorist attacks, the SARS outbreak of 2003 and a series of ‘oil shocks’ have left airlines reeling for the last decade. Experience worldwide has shown that it is extraordinarily difficult for most airlines to deliver consistent profits over an extended period. The most recent setback to the industry is the global financial and economic crisis that has resulted in ‘perfect storm’ conditions of high costs and falling demand. After an estimated worldwide loss of $10.4 billion (Rs 50,260 crore) in 2008, the International Air Transport Association (IATA) expects airlines to make a loss of $9 billion (Rs 43,490 crore) in 2009. At present, recovery is still a distant dream and most airlines seem headed the low-cost way in a desperate attempt to stay afloat.

“The Boeing 747 is the commuter train of the global village.”
—H. Tennekes, in The Simple Science of Flight, 1996

Crystal Gazing
As the first century of commercial aviation approaches its end the industry seems to have come of age. All those associated with air travel can look back with some satisfaction at how much has been achieved. Airliners today, besides being the fastest means of travel, are also among the safest. IATA reported 22 crashes in 2008, and only eight of those involved deaths—an average of one fatal crash per 1.2 million flights. A vital element of future air transport will be a restructuring of air traffic management. While at present a globalised and seamless air traffic system might seem unachievable, it needs to be a target. The ongoing effort to create a ‘Single European Sky’ should represent only the beginning.