Jewish World Review Sept. 27, 2000 / 27 Elul 5760
James K. Glassman
It’s become popular to blame air travel woes on deregulation, just as California pundits and politicos are blaming a freer energy market for rising electric bills. In both cases, competition and free markets are unjustly taking the fall in public commentary. California eliminated some restrictions on the sale of electricity. But state government and the Feds continue to regulate energy production, while environmental groups block the creation of new power plants, which makes it difficult and costly to generate electricity. If it costs a lot to generate power, you can only squeeze so much savings out of new marketing rules.
Now back to the airlines. You might say, “Hey, we have all these different airlines. Why aren’t they competing to win my business with great service?” In fact, while air travel might appear at first glance to be the free market at work, it's actually a highly-regulated industry. On the bright side, that means there are ways to improve it. History says that there are very few consumer problems that a free market can’t fix, so before politicians hold another set of hearings to rake airline execs over the coals, Washington should act to eliminate the regulations that interfere with the delivery of cheap, reliable air service.
Speaking of cheap flights, the quickest way to bring prices down is to reduce the cost of jet fuel, so that means cutting taxes and regulations on oil production. Now let’s talk about other government impediments to a consumer-friendly airline industry. First of all, airlines should be free to fly when and where consumers want. Today, airlines can spend years paying high-priced Washington lawyers to negotiate for a single new international route. Even worse, antiquated laws forbid foreign airlines to operate within our borders. The U.S. should lead the world toward a market in which airlines and their customers – not regulators – decide who flies where and when.
Next, let’s talk about air traffic control, currently suspended in a time warp of vacuum-tube technology. I’m not saying the system is unsafe, but the margin of error needed to accommodate the FAA’s ancient computers means fewer flights and more delays. New technology could allow planes to choose their own paths and find the open air – getting the most efficient use out of our skyways. There’s nothing we can do about the weather, of course, which caused many of the most aggravating delays this summer. But freed from the chains of FAA management and obsolete equipment, technology can do in air travel what it does in every other industry – provide better, faster, cheaper ways of doing business. Europe has already privatized its air traffic control system. We could do the same, while providing the same safety guarantees we have now.
Also, airports themselves should be freed from the clutches of government, both local and Federal. Environmental restrictions limit their expansion, as, in some cases, does a political system of gate allocation. Just one example of the absurdity: when Denver built its new airport, a law was passed forbidding the use of the old airport anymore. Multiple airports for a single city are great at inducing competition and bringing down prices. Cartels aren’t.
While we’re at it, let’s liberate the market for airplanes. Boeing, a great American innovator, competes with Airbus, a European airplane manufacturer that has benefited for years from government assistance. This bureaucratic consortium – what the Clinton Administration might call a “public-private partnership” – has recently taken some baby steps toward the free market.
Two months ago, the European Aeronautic Defence and Space Company (EADS), which owns 80% of Airbus, went public, trading on several European exchanges. But Airbus execs haven’t yet kicked their habit of accepting government subsidies. The French government still owns a big chunk of EADS, the German government appears ready to contribute more than $1 billion to Airbus’ R+D budget, and the UK has agreed to provide close to another billion in low-interest loans. Washington should push European governments to get all the way out of the business and let Boeing, Airbus and whoever else wants to build airplanes slug it out on their own.
Before we blame the market for our aviation problems, let’s give the market
an honest chance to serve
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