What The Media Tell
Americans About Free Enterprise
Needed: More Airline Deregulation
Guest Editorial, Adam D. Thierer
This year marks the 20th anniversary of airline deregulation in
America. Undertaken in 1978, and primarily led, surprisingly enough,
by Democrats like Ted Kennedy and Jimmy Carter, airline deregulation
has proven to be a remarkable success story. Consider some of the
undisputed facts regarding airline deregulation:
- Prices have fallen steadily since deregulation. Airline
ticket prices are almost 40 percent lower today than they were in
- Airlines are safer after deregulation. In the 15 years
prior to deregulation, airlines averaged one fatal accident per
830,000 flights. In the 15 years after deregulation, airlines
averaged only one fatal accident per 1.4 million flights.
- More flights became available after deregulation. The
overall number of airline departures has risen from just over 5
million in 1978 to 8.2 million in 1997 -- a 63 percent increase
over the last two decades. And while air carriers only flew
roughly 2.5 billion miles in 1978, they logged more than twice
that amount last year, flying approximately 5.7 million miles in
1997. Finally, airlines served approximately 250 million
passengers in 1978, but roughly 600 million in 1997.
By almost every statistical measure available, airline
deregulation ranks as an unparalleled success story, and a boon to
business and leisure travelers nationwide. Sadly, however, some
bureaucrats in the Clinton administration think otherwise.
Reporters should be skeptical of their claims.
Department of Transportation regulators are claiming larger
carriers are guilty of "unfair
by engaging in on-going fare wars with smaller carriers.
Occasionally, smaller carriers cannot withstand all this
price-cutting and are forced to abandon certain routes or leave
the industry altogether.
The regulators' solution to this supposed unfairness: Disallow
major carriers from cutting ticket prices to match or beat smaller
rivals. The message this sends is as simple as it is disturbing:
If you cut ticket prices too much, you're in trouble. That's
right, no more bargain-basement fares for consumers! This simply
doesn't make any sense.
So are there are no problems in today's airline marketplace
that Americans should be concerned with or that policy makers
should be addressing? Absolutely not. Indeed, many serious
problems remain in the airline industry, problems that seem to
have eluded the attention of the media so far. For example:
- Almost all airports remain government-owned and operated.
When airlines were deregulated, unfortunately, airports were not.
Thanks to the quasi-socialistic management of most airports,
bureaucrats make the important decisions regarding how take-off
times, slots, and gates are allocated. In practice, this means
many airports became fortresses for some large carriers who can
exercise political muscle with local regulators. Airport
privatization would increase competition.
- America's air
traffic control system remains publicly operated, causing
congestion and threatening safety. Our federally controlled
air traffic control system is technologically obsolete and
inefficient. There is little accountability to customers and
little effort to price airport access or travel times efficiently.
Again, privatization is the solution.
- Airlines face a staggering tax burden. A stifling
variety of taxes and fees, including excise taxes, fuel taxes,
passenger ticket taxes, cargo taxes, and arbitrary landing fees,
cost the airline industry at least $7.6 billion annually. Lowering
this burden would go far toward increasing industry competition,
encouraging new entry and improving service rivalry.
- Foreign competition is prohibited, limiting global rivalry.
Just as Americans benefit from the free trade of other goods and
services, foreign competition in air service could bring them new
service options and lower prices. Unfortunately, regulations
restrict foreign competition for domestic routes, limiting overall
industry competition and consumer choices.
These are the real problems that the government and, for that
matter, the media need to be paying more attention to. Calling
deregulation a failure would be a gross misrepresentation of the
facts. Additional free market reforms would complete the job of
deregulation left unfinished by Congress 20 years ago. Once
complete, consumers will reap even greater rewards in the
Adam D. Thierer is the Alex C. Walker Fellow in Economic
Policy at the Heritage Foundation in Washington, D.C.
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