The director of a large airport once told me, "Individually, the airlines are very rational. But collectively, they behave very irrationally."

Perhaps. But I think that more to the point is the observation that, like other airborne creatures, carriers tend to exhibit flock behavior. When one moves, others will follow.

This has some bearing on two news developments last week: The courtroom maneuverings of travel agents who accuse the airlines of conspiring to cut their commissions, and a possible merger between Delta and either United or Northwest.

The airlines' flocking behavior (described as "parallel conduct" in court documents) simply presents difficulties for travel agents making a case that the airlines collaborated to cut, cap and eliminate agency commissions. True, the carriers seemed to have enacted new and near-identical commission policies in short order, but it's not unusual for them to watch their competitors closely and mimic any behavior that can have an impact on their costs, revenue or market share.

In fact, I'm told that this month airline sales and marketing agents are tying up phone lines into larger agencies in the New York region for conversations that can end with offers of 15% commission overrides on certain routes.

And this is not just coming from international carriers but from the likes of American, Delta and Northwest. No one is charging conspiracy; it appears to be a reaction both to general market softness and a sharp focus on increasing market share.

(Interestingly, one agency owner who reported this to me said that some of the conversations with airlines took a remarkably similar path, with an airline rep first suggesting commissions might be cut over concerns about the agent's ability to move market share. But when the agent began pointing out that his clients were booking away from the caller's carrier in reaction to perceived problems with that airline, the rep quickly came back with additional commission and, in some instances, soft-dollar goodies for clients.)

Accusations of group irrationality on the part of the airlines arise because flock behavior amplifies activity that seems to counter to the long-term interests of the aviation industry. For example, the airport director who leveled the charge pointed out that the airport congestion that creates such headaches for the carriers could be somewhat alleviated if flights were more evenly distributed throughout the day. But passengers all want to book the rush-hour flights, and it would be a brave airline CEO indeed who strays from the flock and bets that he could sell on the proposition that passengers should book flights in less-crowded time slots.

The intense competitive considerations airlines weigh are exacerbated by the weak players among them that cut fares to stimulate cash flow at critical moments, and by the strongest players that make strategic short-term fare cuts in an attempt to scare off new entrants from important routes.

In reality, this sort of competitive behavior (and charges of group irrationality) play out in all major global industries throughout the world. But there's an important difference between aviation and other global industries.

Airlines may fly hundreds of routes across six continents and take minority stakes in other nations' carriers to earn the label "global," but they cannot, under present regulatory conditions, become truly "multinational." If Delta is allowed to merge, the resulting airline will certainly serve more countries, but at the end of the day it will still be a U.S. carrier, just as Air France-KLM is an iteration of a European carrier.

Any major international corporation in today's flat world would find it difficult to be tied so strongly to the fortunes of one country -- even one continent -- and one currency. The primary reason hotel companies continue to hum an upbeat tune as the U.S. economy frays is that they have the opportunity to balance softness here with growth in China, India, the Middle East and Europe.

The Open Skies agreement between the U.S. and Europe is a huge step forward in removing restraints, but it falls short of what British Airways CEO Willie Walsh calls the "transformational" effects that would occur if airlines were allowed to become multinational companies.

I'm aware that giant multinational airlines could result in further homogenization that wouldn't serve the interests of passengers and could lead to bullying of other industry segments.

But I'm willing to let the free market work that out. The alternative to the rise of strong multinational players that can exploit a global marketplace is a flock of smaller players whose movements are too often choreographed by the weakest among them.


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