Wednesday, December 07, 2011

Russia's unfriendly skies

Today's Wall Street Journal has a front page story on the deplorable state of airline safety in Russia. Here's the opening:
Russia, once a global aviation power, has become the most dangerous country in which to board an airliner.  
Investigations of nine commercial plane crashes this year, including one that killed an entire professional hockey team, found a raft of gross violations and errors, such as drunk or sedated flight crews, forged safety documents and panicked pilots. In one crash, the navigator used the wrong guidance equipment and aimed his jetliner at a tree, far from the runway. 
...Russian fatalities and crashes, adjusted for air-traffic volumes, this year exceed those in less developed countries with longstanding safety problems, including Congo and Indonesia, according to aviation consultants Ascend in London.
The article places blame for this lack of safety squarely on the shoulders of insufficient regulation:
Eight of the nine crashes involved Soviet-era planes. But many safety experts say the real problem isn't aging equipment but ineffective regulation, inefficiently small airlines and poorly trained pilots not following modern safety procedures.
Just two years ago, Russia appeared to be an air-safety success story. Following a string of crashes early last decade, the government in 2006 accepted international help to boost safety at its biggest global carriers like Aeroflot and Transaero. By 2009, Russia had no fatal crashes. Since then, accidents have surged amid rising traffic at small, domestic airlines that were largely overlooked by the safety campaign.
At first glance this article would appear to demonstrate the value of regulation and dangers posed by a free market allowed to run wild. But such a scenario should make a capitalist's nose twitch: shouldn't unfettered competition ensure a race to the top and airlines striving to provide the best and safest possible service? Why is this theory not being borne out? What is going on here?

If free-wheeling competition is not breeding excellence in Russia's airline market, that's because it does not exist. To wit:
  • This Business Insider article notes that the Russian government imposes "huge taxes on the import of foreign airplanes" as part of an effort to force Russian airlines to buy domestic planes." Coincidentally, every crash described in this graphic that accompanies the WSJ article involves a plane that was domestically produced. The article makes no note of this.
  • The article describes the crash of a Boeing 737 operated by an affiliate of Aeroflot crashed in September 2008 in the Ural Mountains, attributing it to poorly-trained pilots. It also notes that Aeroflot subsequently sold its stake in the airline. Unmentioned, however, is that Aeroflot is majority-owned by the Russian government, and is thus far from a capitalist institution.
  • Perhaps most notably, foreign airlines are prohibited from competing in Russia's domestic airline market (recall that Russia has nine time zones, making air travel a particularly important part of transportation in the country). This means that Russian consumers cannot avail themselves of airlines that incorporate best practices and Western know-how. Again, zero mention of this fact in the article. Just as competition from McDonald's resulted in a vast improvement in the state of restaurant bathrooms in Hong Kong, the introduction of foreign competition in Russia would surely lead to similar quality improvements and help shake up the country's airline culture.
This doesn't even get into the role of the Russian state in other aspects of the airline industry such as licensure and the allocation of landing slots at airports. Given the country's reputation for corruption, (ranked #143 by Transparency International) it is not difficult to imagine favors and punishments being dealt out by bureaucrats based on political considerations.

Unfortunately none of this was mentioned by the article, which offered up the facile explanation of a paucity of regulation while neglecting to explore other factors. It's this kind of reporting that results in a bias towards regulation and the suspicion of free markets.

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