More: A History of the World Economy From the Iron Age to the Information Age by Philip Coggan

More: A History of the World Economy From the Iron Age to the Information Age by Philip Coggan

Author:Philip Coggan
Language: eng
Format: epub
Publisher: The Economist
Published: 2020-03-24T00:00:00+00:00


Jet-setters

If we could transport our great-great grandparents forward in time, what might surprise and alarm them most? It could, of course, be the sheer volume and speed of traffic on the roads. But surely the most astonishing sight would be the huge metal objects travelling overhead, without any apparent means of propulsion.

The first powered flight by Orville and Wilbur Wright in North Carolina in 1903 lasted for only 37 metres. Almost five years elapsed before a plane managed to fly for a kilometre. But after that, progress was rapid, with Louis Blériot crossing the Channel between France and England, a journey of around 31 miles, in July 1909. During the First World War, military men saw the potential for aeroplanes for reconnaissance, and the first fighter and bomber planes emerged.

A commercial use for airlines wasn’t immediately obvious in the aftermath of the war. Early planes were not robust enough to carry passengers. But an airmail service was created after 1925, and Charles Lindbergh, having been the first man to fly across the Atlantic, piloted PanAm’s first service to South America in 1929. By the late 1930s, the DC-3 was large enough to seat 21 passengers. Shirley Temple, the Hollywood child star, was the first passenger to buy a sleeping ticket on a flight.52 Early airlines realised what Thomas Petzinger dubbed the “first rule of airline economics”: if a plane is going to take off anyway, any extra payload in the form of passengers or goods is almost pure profit.53

In the early years of commercial aviation, flying was seen as a glamorous business. People would dress up to go on a flight. But only the well-off could afford it. All this changed significantly in the 1970s. Jimmy Carter signed the Airline Deregulation Act in 1978, bringing to an end a four-decade period in which routes and fares had been tightly controlled by the US government. In 1960, US airlines carried 62 million passengers; by 2017, they carried almost a billion.54

The first British package holiday was created in 1950 by a Russian émigré called Vladimir Raitz, who offered tourists a six-hour journey (including a refuelling stop) to a campsite in Corsica.55 In the 1960s, Clarksons introduced cheap flights to Spain, spurring the huge development of the Costa Blanca. Exchange controls, which stopped Britons from taking more than £50 out of the country, initially limited the market. But the trend was clear. The introduction of bigger jets such as the Boeing 747 allowed both airlines and travel companies to increase the economics of scale.

The airline industry may have grown hugely but it has not been enormously profitable. Warren Buffett, probably the world’s most successful investor, once quipped that “if a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favour by shooting Orville down”.56 There are huge costs involved: planes that must be bought (or leased) and maintained; landing slots at airports; and large numbers of staff. Fuel costs can be highly volatile, as can passenger numbers in the face of economic downturns and terrorist incidents.



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