Hamish McRae: Don't feel sorry for the airlines - they're an industry like any other

British Airways reports dreadful figures, while the very future of Swissair and Sabena hangs in the balance. Yet little Ryanair seems to thrive. What's up?

Airlines are hugely symbolic. They are perhaps the most visible sign of humanity's mastery of technology, whisking millions of people from one side of the globe to another with astonishing reliability. They remind us of the still-enormous power of nationalism, for unlike trains or cars, aircraft bear flags and brand themselves with national signs. And they symbolise that great, if criticised, force we call globalisation, with all its freedoms, its riches and its perils.

So when the airline industry is in trouble, we see that as symbolic of something more. When Concorde crashed people worried about the arrogance of our attitudes to technology. When Swissair and Sabena ran into financial difficulties, it became a symbol of Swiss and Belgian national ills. And when the industry as a whole is in trouble – as it is now – we start to question globalisation itself.

And we are wrong. We should not be dazzled by the symbols but instead understand that airlines are an industry like any other – just one that happened to be unusually vulnerable both to terrorist attack and the swings of the world economic cycle. If the attacks of 11 September hit the world economy at a particularly unfortunate time, savaging demand just when it was already turning down, they struck the airline industry at an utterly dreadful one.

We love to fly. The long-term trend of air travel is solidly upwards, having risen far faster than the planners a generation ago believed possible. We are, of course, hugely hypocritical about this, for we fret about the crowding, the noise, the pollution, the delays – all the costs and irritations of air travel. But we go on doing it.

But this upward trend in air travel, rising at roughly twice the rate of growth of the world economy, has created a tricky industry – one that is very hard to manage. It is highly cyclical. It sells a product that it totally perishable – an unsold seat on a plane is gone for ever. It is distorted by odd international agreements and subsidies.

Yet it is quite an easy industry to enter. You rent a plane or two, get permission to fly a couple of routes, have a nose for publicity and service and you have a triumph, a disaster, or maybe both. Ask Sir Richard Branson – or Sir Freddie Laker.

British Airways and Ryanair are intriguing, not as symbols but rather as different business models. BA had a period when it was the most profitable airline in the world, at one stage making more money that all the European airlines put together. But its success was based on the North Atlantic routes, while it used loss-making European ones to feed into its Heathrow hub. The map of routes looks great, spanning the globe from Sydney to Vancouver. The money map looks very different.

Like so many success stories, it became arrogant. It appointed a chief executive who had no intuitive feel for the business and when the world economy turned down it was deeply vulnerable. A few fewer pounds on grand, prize-winning headquarters, a few fewer francs spent on an unsuccessful French subsidiary, a few fewer marks on its German one and the airline would in much better financial shape now. It is moving, but late, late, late.

Actually I think it will be fine, having sorted out its top management while retaining its quality edge on the North Atlantic route. The US and UK economies will probably recover more quickly from the current downturn than anywhere else and BA will recover with them. (Its planes on the London-New York route at the moment seem to be pretty full but that does not say anything about the rates passengers are paying.)

Ryanair is a different model. It copied the most successful US low-cost airline, South West, by simplifying every aspect of the business and using cost savings to cut fares. The genius lies in the detail: everything from using steps rather than docking gangways so that passengers can get on to the plane at front and rear to cut the turn-around times, to internet booking to cut the ticketing costs.

There is a general rule in business that the tops and bottoms of markets will be fine, but the problems are always in the middle. Airlines are no exception, so the middling carriers – like Swissair and Sabena – will have a tough time, just as the middling carriers in the US have struggled. The weakest will die. But this process of renewal is the very core of the market economy. Firms rise because they provide products or services that people want at a price they can afford. Firms die. Or at least get taken over when they fail.

Why should airlines be different? If you don't have this Darwinian process you cannot advance.

So the present turmoil in the European aviation industry is one of those periods of flux that has, for example, given us better cars or mobile phones. The market will signal what it wants. Sensitive regulation will create an environment that enables the airlines that survive to provide it.

So the symbolism that matters is not what airlines say about technology or nationalism or globalisation. It is what they say about human choice. We choose to have a weekend in the south of France or in Scotland because we would rather spend money doing that than, say, buying a new washing machine. We choose how much we would like to spend on an airline seats and we wait for the wonderful hidden hand of Adam Smith to provide it.

Usually, shifts in an industry are so slow that we are hardly aware of the strange, still-misunderstood mechanism that supplies us with our needs. But every now and again there is a period of wrenching change. The airlines are going through one of those changes now. It is an awful time for them but it forces them to do the things they probably should have done long before. Some are better placed to adapt than others, which it why Ryanair seems (let's have a little caution here) to be doing better than many of its rivals. But in the end we all benefit.

Five years from now Europe will have a much better airline industry. That is great. Human beings will always need to meet face to face – and we need airlines to be able to do so.