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FRANCE WANTS TO GIVE AMERICAN PLANES THE GATE
April in Paris spells romance, and U.S. airlines hope that Ameri cans will forget the recession and fly off for some French-style fun. The carriers plan to boost capacity to France this spring and summer by a fat 37%. Already, cheap fares beckon. But don't dig out your plan de Paris just yet: France is fighting to make that trip tougher to make.
Bitter about the increased competition facing Air France, the French are demanding sharp cutbacks in the number of seats U.S. carriers make available for tourist season, which begins on Apr. 1. Proposed increases are far larger than projected jumps in demand, the French argue, and will drive fares down. U.S. carriers say the demand is there. Emergency talks were deadlocked in mid-March, and both sides agree that they're headed for a crisis. "It's a very, very bad situation," says Arnold J. Grossman, vice-president for international planning at American Airlines Inc.
It could get worse. The two sides are scheduled to meet again on Mar. 30. The French won't say what they'll do if no resolution is found. However, officials at the Transportation Dept. note that if U.S. carriers don't back down, France could refuse to let carriers unload. Or, it could make them fly home empty. The U.S. could do the same to Air France. Such action requires White House approval, but a Transportation official says: "I think it has the potential to get there." Even compromise could stir more trouble. Industry officials say the situation sets a bad precedent for other countries seeking changes in bilateral pacts.
LOSING SHARE. Tensions have been building for some time. An industrywide shakeout has eliminated the weakest American carriers, leaving the major U.S. airlines more efficient and financially stronger than many of their state-owned European rivals. The result: loss of market share for the Europeans. Since 1980, Air France's share of the U.S.-to-France passenger market has dropped to 30% from 50%. So when U.S. carriers unveiled plans to beef up service, France demanded 20% cuts instead.
As justification, a French government official calls planned 37% increases in capacity way too high compared with optimistic projections of a 12% increase in demand. "The Americans seem to pay no attention to supply and demand," he says. "Inevitably this means fares would fall." But there's more at issue. Privately, the French claim American competitors want to hog market share at the expense of profit. And they believe U.S. carriers may be rushing to grab a European toehold for fear the European Community will shut the window when it takes over regulatory control in 1993.
France is asking the Transportation Dept. to join it in jawboning the U.S. airlines. And "if we don't make the cuts, the French will," says a Transportation official. The French even drew up a document outlining reductions they'd like from several U.S. carriers (table).
NO RIGHT. But there's little chance that Washington will join the French call for cuts. Says Transportation Secretary Andrew H. Card: "We expect France to live up to our bilateral agreements." U.S. officials note that the proposed increases are in line with a capacity accord worked out with the French in 1990. And while the French say the treaty lets them seek cuts if added capacity would disrupt their own services, U.S. officials say the French have no right to block service on routes already agreed to.
U.S. carriers are hardly inclined to back down. United Airlines Inc., for one, agrees that building strength in Europe is one reason for adding capacity. But U.S. carriers believe Air France is just unhappy about eroding share. American's Grossman says his airline has long sent nearly full planes from the U.S. to Paris. He adds: "We are not dumping."
The issue is doubly vexing for the precedent it could set. Germany, for one, wants to curb U.S. expansion by limiting each side to no more than 60% of combined two-way traffic, though it shows no sign of canceling bilateral pacts. But Giovanni Bisignani, Alitalia's CEO and head of the Association of European Airlines, warns that ifthe French dispute is not solved bilaterally, "some European carriers may push for a common accord." It looks like more turbulence ahead.HARDBALL A LA FRANCAISE
To get U.S. carriers to cut summer capacity by about 20%, France wants:
AMERICAN To forgo a second daily flight from Chicago to Paris
DELTA To drop plans for a nonstop Orlando-Paris flight, scheduled to begin
June 4, and for continuing service from Paris to Geneva
NORTHWEST To reduce seating available on flights from Boston to Paris
TWA To reduce available seats by 7% on flights from New York, Boston,
Washington, St. Louis, and Los Angeles
UNITED To reduce overall seating by 20% on flights from Washington, Chicago,
Los Angeles, and San Francisco
Seth Payne in Washington, Andrea Rothman in New York, and Stewart Toy in Paris, with bureau reports