Mergers Or No Mergers, It’s Time To Re-Regulate The Airlines

I write this from the terminal of the Boston International Airport. I am about to board a small prop plane to Harrisburg, Pa, the state capitol. Given the plane’s small size, and my largish one, the ride will be uncomfortable. Not only will my 6’7′ frame be crammed into a tiny seat, but the propellers will sound like an electric shaver next to my ear for an hour and a half. Winds will bat the plane around as heavy seas do a rowboat.

For the privilege of this unpleasant ride, I am paying US Airways $851. Luckily for me, the taxpayers of Pennsylvania are reimbursing me, because their state legislature is flying me to Harrisburg to give my views on highways and suburban sprawl.

It has been more than 20 years since President Jimmy Carter and Alfred Kahn, chairman of the now defunct Civil Aeronautics Board, began deregulating the airlines. It is time to face facts about this experiment: It has failed. Every single aspect predicted by the advocates of deregulation has gone the opposite way. Competition, the theory went, would increase the number of airlines, increase the number of direct flights, make ticketing easier, and bring simpler, and lower fares.

At first, the theory seemed true. In the early 1980s, low-cost carriers like People Express offered short- to long-distance flights for pocket change. But in the ruthless consolidation that followed, these carriers were driven out of business. Now, a handful of oligarchic airlines reign over the skies like despots. Many smaller markets, like Harrisburg, have seen their air service, something vital to their economic health, ruthlessly extorted by one or two airlines. Flying has become unpleasant, uncomfortable, unpredictable and expensive. Passengers have no guarantee what they will pay, or under what conditions they will have to pay it.

The recent proposed merger between US Airways and United Airlines would do nothing to address these problems. It would probably make them worse. As it happens, these two airlines are already the only ones flying to Harrisburg from Boston. Their already vicious level of competition — I could have flown United and paid $856 — has not exactly produced affordable service. The problem with the airline industry is not mergers or no mergers, but the relative freedom airlines have now to engage in predatory capitalism with their customers.

A few weeks ago, I watched that classic movie from the early 1970s, The French Connection with Gene Hackman. At one point, the local New York villain suddenly decides to fly from New York to Washington to meet the mysterious Frenchman. The film shows the bad guy walk up to the Eastern counter at the airport, and say, ‘One ticket to Washington, please.’ The clerk says, ‘That will be $40, please.’

And that’s it.

Can you imagine something so simple nowadays? Forty dollars to fly from New York to Washington, at the last minute. Even with inflation, that’s pretty good. And consider what the villain did not do. He did not call seven, 14 or 21 days in advance to get this price. He didn’t have to stay over on a Saturday night. He wasn’t required to pay $75 if he changed his return date, or buy a whole new ticket at full-fare if he changed his departure date. He bought the ticket from ‘Eastern,’ one of many defunct airlines. That flight now to Washington from New York would cost $311. And that’s a bargain, considered what is being charged to smaller cities like Harrisburg.

Airlines executives frequently state that average ticket prices have declined in the last 20 years. But, as Robert Kuttner showed in his book Everything For Sale: The Virtues and Limits of Markets, prices declined even faster during the era of regulation. And average prices don’t take into consideration the economic costs of unnecessarily extending stays through a weekend to get a lower fare, or not being able to easily change one’s schedule. Nor do average prices consider that fares have increased enormously in some markets.

There is a way out of this mess: Reregulate the airlines. Reestablish the Civil Aeronautics Board, or some newer equivalent, which would set routes and fares. We would once again have a reasonable, stable system of air travel. Although Sen. John McCain and others have introduced passenger ‘Bill of Rights,’ few have contemplated complete re-regulation. They should.

People often forget that private airlines depend on a system of publicly financed, publicly-maintained airports. In giving these over to airlines to use as they will, it’s as if we had given over our public highways to a handful of taxicab fleets, who were allowed to charge whatever they wanted, and on whom we were completely dependent.

Americans have fallen in love with the idea that competition makes everything cheaper and better. This is not always true. With air travel, it’s time we returned to the days, like in those old movies, when the nation’s air travel system served its passengers, rather than only the profits of a dwindling number of airlines.

Alex Marshall, an independent journalist, is the author of How Cities Work: Suburbs, Sprawl and the Roads Not Taken. He writes frequently on transportation.

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