Interesting story on BBC Scotland and elsewhere today about fears that BMI is about to axe its Glasgow-Heathrow route. If the axe does indeed fall, only BA will be left operating a route between Glasgow and London. Business leaders have raised legitimate fears over falling capacity and monopoly pricing. They intend to raise these fears directly with Michael Moore, Secretary of State for Scotland.
Why is this interesting? Well it's a very good example of a rational decision of a firm operating within a competitive market being detrimental to the national economic interest. BMI's decision makes commercial common sense; the company is supposedly losing £1m a month on its Glasgow routes and stands to make a handsome profit if it turns its Heathrow slots currently reserved for Glasgow flights over to profitable long-haul operations.
Scotland is a small, open economy on the periphery of Europe. Good connectivity is therefore very important for the effective functioning of the economy (on this much I can agree with the 'business leaders'). As things stand, decent air links with Heathrow are essential (although the STUC wants to see a significant modal shift to rail). The loss of the BMI services is a genuine problem.
So what can we expect business leaders to press for when they meet Mr Moore and/or Scottish Government Ministers? Re-regulation of the industry to ensure minimum service levels are retained for social purposes? Funding of a new state owned entrant to the industry which will prioritise the social interest above short-term profit? I suspect not...
No, I think we can safely assume that subsidy, through reinstatement of the Route Development Fund or some new mechanism, will be the only solution on the table. I don't have a huge problem with this but then again I don't spend my whole working life whinging about the size of the state, regulation, red-tape and the failure of politicians to fully appreciate the wonders of the market. The hypocrisy is mind-blowing. And of course, on the other side we can expect BAA, BA and others to embark on a campaign to reasure us all that a BA monopoly service really isn't a threat at all.
Meanwhile, politicians of all stripes will continue to prioritise the views of business 'leaders' and 'experts' over all other voices....
Stephen Boyd - STUC
The blog of the 'There is a Better Way' campaign by STUC staff about policy issues that are, or should be, in the news and guest contributors on issues of social justice. Written from a STUC perspective, contributions will often cover areas where there is yet no settled STUC policy and go into areas in more detail than our formal decisions. We welcome debate and we don’t expect everyone to agree with us, but we will remove any comments that are offensive, irrelevant or otherwise annoy.
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