COMPETITION among airlines has served Hawaii's tourism well, so any large merger is reason for concern that it will result in a series of moves with ramification for the islands. The decision by United Airlines to abandon its proposed $4.3 billion takeover of US Airways should bring an end to any such slippery air lane. The decision should create stability and renewed competition in pricing and service. No turbulence over
demise of United dealThe issue: United Airlines has
announced it will terminate its
proposed merger with US Airways.United announced its intention to buy US Airways in May of last year to bolster its route network on the East Coast, which is dominated by US Airways. In what was seen as a countermove by United's archrival, American Airlines in January bought Trans World Airlines, raising concerns about competition in mainland-Hawaii aviation.
United's decision to back away from the deal resulted from continued scrutiny by Justice Department officials after 14 months of talks. That posture by the department did not change with the Bush administration because Charles James, the new head of the antitrust division, and several other officials were forced to remove themselves from the case because of conflicts of interest.
"When you see competition beginning to diminish there are concerns that arise, the same concerns regulators have," Bob Fishman, chief executive of the Hawaii Tourism Authority, said at the time of American's acquisition of TWA.
United's purchase of US Airways would have had no direct effect on Hawaii, but it undoubtedly would have created a new wave of maneuvering in the industry. Executives at major airlines said they would have to join with one or more of their competitors to match the size of United, if the deal had been allowed to take place.
"Had this been approved, it would have transformed the competitive landscape of the airline industry here and abroad with negative implications for consumers for years to come," said Kevin P. Mitchell, chairman of the Business Travel Coalition, which opposed the merger. "This puts the brakes on."
While United's deep breath, although abbreviated, caused nervousness throughout the industry, its exhale may be a relief to itself. Airline revenues in May took their biggest dip in two decades, and United expects a double-digit decline in revenues over the entire second quarter. This may have signaled a time to concentrate on restoring profitability instead of absorbing another airline that has suffered even worse losses in recent months.
Comes the revolution. The hard-left, Maoist, Marxist-Leninist Chinese Communist Party has decided to bring into its elite membership the business executives and entrepreneurs who personify the world of capitalism, free enterprise and private property. Perhaps the CCP is bowing to the inevitable, seeing as how private business has driven much of China's recent economic progress. Chinese entrepreneurs
find room in the partyThe issue: The Chinese
Communist Party will admit
business executives as members.Even so, the party is due the applause it craves from inside and outside of China. But has anyone checked the mausoleum of Mao Zedong in Tiananmen Square to see if the high priest of Chinese socialism and leader of its Marxist revolution is spinning in his grave?
The authoritative Economist magazine reports that the number of Chinese working in privately owned companies (with at least eight people) has risen to 24 million from 1.8 million 10 years ago. Another 30 million are estimated to be employed in smaller firms.
Those private enterprises have helped to absorb rising unemployment caused by failures in China's state-owned enterprises. The Chinese government calculates -- and this is a wild guess -- that 125 million people are in motion every day looking for work. For perspective, that's equal to the population of Japan and almost half that of the United States.
For American business executives and investors, including those in Hawaii, the CCP's decision is probably good news. The presence of counterparts inside the Chinese hierarchy might ease the way past the excessive and cumbersome bureaucracy, power struggles between Beijing and the provinces, and inconsistent application of laws and regulations.
Whether those business executives will slice into the rampant corruption of China remains to be seen. Presumably, Chinese entrepreneurs are no more or less honest than members of the authoritarian party, but they might provide a check and balance.
Having business executives in the CCP may provide a nudge for China to join the World Trade Organization. That admission has been dragged out because of continuing skepticism of the world's trading nations that China will agree to the WTO's rules. More important, and less certain, is whether China will abide by the rules once having become a member. Beijing's record on this score has been less than exemplary.
The CCP today numbers about 65 million, or 5 percent of China's population. About 300,000 are already in business, having left state-owned enterprises or other party positions to set up shop. Western believers in political freedom hope that Chinese capitalists will gradually foster a Chinese form of democracy. That, too, remains to be seen.
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