Internet Travel Monitor - Travel Industry News
September 27, 2017
What Wasn't Cheaper in the '70s? Airline Tickets
A Senate proposal to reregulate U.S. airlines would restrict choice and harm passengers
"Unreasonable" is one of the most subjective words in the English language. What I see as unreasonable might be perfectly reasonable to half of my friends, for instance. Unreasonable is about opinion and vagaries rather than facts and specificity.
Yet a few senators are proposing an amendment to the pending FAA reauthorization bill that would allow federal bureaucrats to determine whether America's airlines are charging "unreasonable" fees that are "disproportional" to the costs incurred to, say, bring your pet on board or check a bag. The so-called "FAIR Fees Act" - which aptly uses "ridiculous" to achieve the acronym - seems oblivious to history or economics. Under the banner of "consumer protection," it would do precisely the opposite. This amendment would drive up the price of airline tickets while eliminating customers' ability to choose which services they do and do not want.
To apply the "unreasonable" judgment to other businesses, what's to prevent Congress from dictating the price of a cup of coffee? Surely it doesn't cost Starbucks $4 to brew that Venti cold brew. And now that Apple's iPhones are churned out like widgets and upgraded every year, might it be unreasonable that their cost is approaching $1,000? You see where this is going.
WHAT DEREGULATION ACHIEVED
The airline industry knows what an overzealous regulatory state looks like, and it's not pretty for America's flyers, for the industry itself or for the American economy. Indeed, this history is instructive as members of Congress consider a return to our regulatory past. The amendment being proposed today would actually reverse the 1978 law signed by President Jimmy Carter that deregulated the airline industry and gave birth to the aviation system that serves America so well today. Sen. Ted Kennedy, D-Mass., shepherded that legislation and was its most vocal advocate. His admirable goal was to bring affordable air travel to millions more Americans, and it is a testament to the late senator that we've achieved just that.
In 1974, when the government determined prices for flights, it was actually illegal for an airline to charge less than $1,442 in inflation-adjusted dollars for a flight between New York City and Los Angeles. Last year, the average one-way fare in that market was $320. Let that sink in for a minute. Before deregulation, people of means were most likely to fly and experience the convenience and benefits of air travel that 2.2 million passengers take advantage of daily.
Airfares today are at historically low levels, and customers have more choice than ever. The average round-trip domestic fare including ancillaries fell 41% from 1979-2016 and 17% from 2000-2016 in real terms. Year after year, we’re seeing record numbers of flyers, and more than one-third of those traveling today have an annual household income less than $50,000 — a testament to the à la carte pricing model that allows passengers to choose the lowest possible price.
Today a diverse set of 11 U.S. carriers offers both all-inclusive and à la carte products, as well as products and price points that range from first-class to budget-friendly travel that is accessible to families of modest means. A one-price-fits-all approach would eliminate the ability of customers to choose what product works best for them. Airlines would have fewer opportunities to distinguish their offerings — which serve many travelers who could not otherwise afford to fly — and the current growth of air travel would decrease, particularly in smaller communities.
And if the diversity of options that we have today is destroyed and reverts to the proven failures of years past, the U.S. economy most certainly will suffer collateral damage. One cannot undermine an industry that supports 27,000 daily flights, 5 percent of GDP and more than 10 million jobs without creating a ripple effect throughout the economy. Ultimately, all Americans would pay the price.
DON’T TURN BACK THE CLOCK
Airlines have emerged from the Great Recession financially healthy and able to invest in the people, products and technology that make flying better. New fleets of modernized jetliners, improved airport accommodations and in-flight Wi-Fi don't happen if airlines aren't profitable. If Congress moves in the direction of the pre-1979 regulation days, the nation will return to a period in which flying was cost-prohibitive and less accessible to millions of Americans. This is history, not hyperbole.
Airlines for America is not arguing against all regulations. In fact, U.S. airlines are able to serve our customers in spite of deep regulatory interference and mind-boggling micromanagement. Airlines face 13,000 regulations across 20 different federal agencies. The regulatory tentacles of four Cabinet-level departments and six federal agencies touch nearly every aspect of an airline's operations. This has made our industry the 6th-most federally regulated industry out of 107 American industries, according to a study by the Mercatus Center at George Mason University.
Congress should walk away from this misguided attempt to let federal regulators determine what works, or doesn't, for the flying public.
Our passengers are more than able to navigate the wide menu of choices that airlines offer without assistance from Washington. Providing this array of options is what allows airlines to remain both affordable and profitable.
After examining this proposed legislation very closely, I can confidently say that it is unwise and, yes, unreasonable. And I suspect that all of my friends would agree with me on this one.
Copyright 2017 CQ Roll Call. All rights reserved. From http://www.rollcall.com. By Nicholas E. Calio.
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