Airlines Should Reform Themselves
Over the past two decades since deregulation, the U.S. airline industry has been buffeted by many forces, from high fuel costs to labor disputes to competition and consolidation. Today, the industry is in good shape, enjoying the rewards of a strong economy, cheap fuel, and years of cost-cutting. But the benefits to the flying public have begun to look more meager. Consider some recent trends: Price-gouging of business customers. Virtual monopolies on certain routes. Neglect of small markets. Now, Washington is on the case, with both the Transportation Dept. and Congress mulling some moves.
Of all the reforms being contemplated, Transportation's is the most worthwhile. Defining predatory behavior and setting up a mechanism by which airlines can be monitored and complaints promptly adjudicated would go a long way toward countering the most flagrant anticompetitive acts--like when Northwest Airlines Inc. pulled out all the stops in 1993 to outsell Reno Air Inc.'s new route between Reno and Detroit, going so far as to establish a mini-hub in Reno, a city it had never before served. Federico F. Pena, then Transportation Secretary, stepped in and jawboned Northwest.
Other cases may be less egregious, but still troubling. On some business routes, the big airlines have stopped competing on price. At some airports, they have a lock on slots. The upshot: New competitors can't even get to the gate, and underserved markets remain so. One bill pending in Congress would reclaim slots from major airlines and auction them off to startup carriers. Another proposes low-interest loans for any carrier that agrees to fly from cities deemed underserved.
Legislating desirable outcomes is seldom the best solution. But while the major airlines scoff at these efforts, they should listen up. Rather than suffer reregulation at the hands of Congress, the carriers should move preemptively. They shouldn't raise the barriers to entry so high that no competitor can scale them, and they shouldn't be gouging their clients.