Thursday, April 13, 2017

Let Richard Branson kill United Airlines

I found this to be a very interesting read and, I hope you enjoy it as much as I did since I do agree with each point the author brought up!

Michael Carter
Editor and Chief
Aero Pacific Flightlines

Most semi-frequent travelers have their own private no-fly list—that one airline whose aggressive incompetence and casual cruelty leads them to say “never again.” Even before introducing the term “re-accommodate” into the National Registry of Corporate Euphemisms, United has been that no-go airline for me, the result of a long series of outrages beginning with the near-ruination of George Gershwin’s “Rhapsody in Blue.”

And yet, after grim Expedia searches, I continue to sporadically fly those unfriendly skies, because unlike evil rental car companies (cough *AVIS* cough), air carriers have colluded with government to shield themselves from the consumer-friendly gales of competition. Protectionist legislators have basically made it impossible for us to quit United.

Perhaps you’ve seen that graphic making the rounds, showing how mergers over the last decade have consolidated the largest 11 domestic airlines into a profitable, customer-abusing Big Five? The accompanying BuzzFeed headline is a true enough conclusion: “Airlines Treat You Badly Because They Can.” But like a lot of the how-we-got-here coverage this week, it misses one elephant in the room.

Foreign companies and individuals—think Richard Branson and Virgin Atlantic Airways—are forbidden by U.S. law from owning more than 25% of a domestic airline. That’s why Virgin America could be sold last year to Alaska Airlines over the express wishes of Virgin’s famous founder: He just didn’t have enough votes.

The differently headquartered are banned outright from servicing routes between two American cities, a practice with the sinister-sounding name of cabotage. And carriers from Singapore to the Gulf States are not only barred from competition, but subject to sneering taunts by American legacies from behind the protectionist firewall, such as when United CEO Oscar Munoz this March said that companies including the well-regarded Emirates “aren’t real airlines.”

What on Earth justifies such pre-Trump xenophobic mercantilism in our increasingly globalized world? According to North America’s Air Line Pilots Assn.: “These regulations ensure the national security of our country and the integrity of our airline industry.” Or translated into honest-ese, “These regulations ensure the job security of unionized U.S. nationals and the continued existence of poorly run U.S. airlines.”

The nexus between neglected infrastructure and national security is one of the most reliably insane areas of public policy. Recall the coast-to-coast freakout in 2006 when Dubai Ports World attempted to buy management rights to a half-dozen major U.S. ports. Or, for those of us with longer memories, the shameful panic here in L.A. a quarter century ago when the county awarded a subway-car contract to a company from (shudder) Japan.

In fact, one of the biggest worries among free-market economists about President Trump’s gestating $1-trillion infrastructure bill is that it will contain “buy American, hire American” provisions that would discourage needed investments from foreign companies and financial institutions.

The irony of America’s lagging air travel quality—including the abject lousiness of its airports, which President Trump is absolutely correct about—is that we once led the world in airline innovation. When the domestic industry was deregulated in the mid-1970s, thanks to then-Sen. Ted Kennedy, future Supreme Court Justice Stephen Breyer, liberal economist Alfred Kahn, and President Carter (yes, you read all that right), our trading partners scrambled to become more like us. Then they surpassed us.

It took a couple of decades, but eventually the European Union dismantled subsidies for national carriers, privatized a number of airports (something unheard of here), and let literally hundreds of low-cost airlines run riot. It even allowed some foreign-airline cabotage, on a case-by-case basis. The result is those annoying Instagram pics from friends who live in London, showing off that people in Europe fly everywhere for dirt cheap.

Yes, airlines on the continent come and go faster than New York restaurants. But that’s precisely the point: With real competition comes real failure, hopefully followed by bankruptcy and even liquidation, instead of American-style too-big-to-fail bailouts. How many customers must United pummel before they can Gershwin us no more?

As Marc Scribner of the Competitive Enterprise Institute put it this week: “If American consumers wish to enjoy improved service quality in air travel, they should demand that Congress repeal 90 years of anti-competitive federal law. Less regulation of air travel, not more, is the solution.”

This will be a lonely sentiment in a week when headline-chasers from Republican New Jersey Gov. Chris Christie to Democratic Maryland Sen. Chris Van Hollen elbow each other out with interventionist solutions. But if we really want to punish United Airlines—and Lord, how I’ve dreamed of this day—then letting Richard Branson and his cohort come and compete on American soil will do more to extract justice than a hundred regulators ever could.

(Matt Welch - Los Angeles Times)

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