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What The Media Tell Americans About Free Enterprise

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May 1998


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 1978.
  • 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 competitive practices" 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 deregulated marketplace.

Adam D. Thierer is the Alex C. Walker Fellow in Economic Policy at the Heritage Foundation in Washington, D.C.


Rich Noyes




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