Terrorism and TSA Restrictions on Passengers

As I'm sure you all have heard, a 23 year-old Nigerian man (who studied mechanical engineering at University College London and whose father is a former Nigerian bank executive) attempted to detonate an explosive device aboard an international flight during the descent into Detroit's Metropolitan Airport yesterday afternoon. The man claims he acquired the device in Yemen and had orders from Al Qaeda to carry through the attack, and Christmas day seems like a good choice for a day to attack America.

As you also could have guessed, the TSA will surely tighten (and it seems like they already have tightened) security on both international and domestic flights and has already imposed new restrictions on passengers onboard aircraft. These restrictions, as always, are purely reactive. Does the TSA think that anyone is dumb enough to try to copy-cat the attempt by employing the same methods now that the TSA is surely watching?

The restrictions are targeted at

what passengers and crew can do in the air. Although the T.S.A. has not announced it yet, Air Canada appeared to scoop the U.S. government when it posted a statement on its Web site saying that passengers on U.S.-bound flights will not be able to leave their seat in the final hour of the flight, nor will they be able to have anything on their laps: “New rules imposed by the U.S. Transportation Security Administration also limit on-board activities by customers and crew in U.S. airspace that may adversely impact on-board service. Among other things, during the final hour of flight customers must remain seated, will not be allowed to access carry-on baggage, or have personal belongings or other items on their laps.”

I'm sorry but some of these restrictions are just plain stupid. Are you telling me that not letting me read a magazine or work on my laptop for the last hour of a flight will drastically impact national security or put an aircraft at risk? What do they expect passengers to do for that last hour, sit plainly and quietly in their seats bored out of their freaking minds? What will not letting passengers leave their seats for the last hour of the flight accomplish? Will reducing their mobility and confining them to airplane seats that keep getting smaller and smaller make the plane any more secure?

Potential terrorists will simply assemble their devices during the second to last hour of the flight instead of the last hour of the flight and keep the device in their backpacks and detonate them under the seats in front of them instead of on their laps. These restrictions are simply idiotic knee-jerk reactions made by bureaucrats that have simply not thought of the alternative ways in which terrorists will get around these restrictions. The only way to decrease the probability of such an attack is to prevent these materials from getting onboard the planes in the first place. Once the materials are on the plane, terrorists will find a way to detonate them. What are they going to do next: make me take my pants off during the last hour of my flight so that they can see exactly what is going on in my lap?

Don't be stupid; the TSA, or in this case the security personnel in Amsterdam royally screwed up, (and this extends to the intelligence agencies that overlooked the terrorist in this case after his father went to the US Embassy in Nigeria to notify them as well as the bureaucrats that are in charge of deciding what is and what is not allowed on airplanes - i.e. the liquid that the terrorist smuggled onto the plane and used in his device) and they think that imposing harsher restrictions on passenger mobility while on the flight will simply fix their screw-up. Not gonna happen.

Airlines, Recession and Going Bust

So far this year, about 30 airlines have gone bust around the world, including ATA, Aloha, Skybus, Sterling, and Frontier Airlines, all relatively small airlines with mostly regional coverage. However, these small carriers declaring bankruptcy does not bode well for an aviation industry staring down a global recession, tight credit, and decreasing demand. These bankruptcies have produced ripple effects throughout the aviation sector and have left tens of thousands of travelers stranded in airports around the world. Will we continue to see more bankruptcies? Will we see consolidation in the airline industry much like we've started to see in the banking industry?

Last month, Willie Walsh, CEO of British Airways predicted that by the end of this year, 30 more airlines will declare bankruptcy as a result of the current economic climate, causing more headaches and stranding more passengers worldwide. Furthermore, analysts are predicting consolidation within the aviation industry in order to take advantage of economies of scale. 

Today, the Justice Department approved the merger between Delta Airlines and Northwest Airlines, after a six-month investigation as to the impact of the merger on consumers. This deal will create the largest airline in the world. Also today, Lufthansa, the German carrier, came to terms to purchase BMI, the British airline, and is also seeking to purchase major stakes in Austrian Airlines and Alitalia. Major carriers like British Airways, Air France-KLM, and Virgin are also positioning themselves to buyout smaller carriers and expand their networks.

However, most analysts are overlooking one important obstacle to airline consolidation, especially on a global scale. The main obstacle to airline industry consolidation globally is that it is illegal, and has been since 1938, for foreigners to own US based air carriers. The United States caps foreign ownership of domestic carriers at 25%, thus ensuring that the only consolidation in the US market can come from within. We will most likely see less consolidation than most are predicting, and the consolidation that we do see, will be a wave of "intra-market" mergers, especially within the US and the EU.

Because the sources of continued financing and merger are limited to "intra-market" transactions, especially in the US but also in Europe, our wave of consolidation may be much smaller in scope and not sufficient enough to ensure that the airline industry continues to function at its current capacity. In the short run, as a result of tighter credit, decreased consumption of aviation industry services and a global recession, we may see further bankruptcies and more headaches for travelers because airlines will not be allowed to merge across borders and take advantage of economies of scale. In the long run, none of this matters b/c we're all either dead or won't need airlines. (Hopefully someone invents Star Trek style teleportation!)