In the U.S. airlines remain one of the most heavily regulated industries. Most people misunderstand airline deregulation. Calls to ‘re-regulate’ stem from a mistaken idea that the regulated era was somehow pro-consumer.
What deregulation ended was the government deciding which airlines could fly where, and what prices they’d charge. The aim of federal regulation was to protect airlines from ‘ruinous competition’. Prices were set to ensure profitability on more or less a cost-plus basis. That also meant unions did well, whatever wage increases airlines gave got passed along to consumers and competitor airlines weren’t allowed to undercut them.
The regulated era also meant that few people could afford to fly. The food was better back then because airlines couldn’t compete with lower prices, prices were set higher than costs and each passenger was profitable. Without the ability to discount airlines competed by rebating more to passengers in the form of amenities like elaborate meals. The Civil Aeronautics Board, concerned that airline catering was undermining price regulation (and airline profitability) once discussed imposing regulations on the thickness of sandwiches that could be served on board.
In the grand tradition of regulators protecting the profits of large businesses at the expense of consumers, a member of Germany’s governing coalition wants to set legal minimum prices for airline tickets.
This comes after Lufthansa’s CEO called Ryanair’s low fares “economically, ecologically, and politically irresponsible” and sought government protection in the form of a ban on low fares.
Lufthansa CEO Carsten Spohr and governing coalition member Alexander Dobrindt both use the environment as justification for the ban, though Ryanair’s fleet is more fuel efficient than Lufthansa. And as for whether low fares are economically responsible, low cost carriers have had the highest margins on the continent.
This is naked protectionism using the environment as fig leaf, when Ryanair’s CO2 emissions are far less than the CO2 generated streaming porn.
Dobrindt calls for bans on low fares and reduced VAT taxes on trains, relegating poorer people to the rails and preserving the skies for elites.
Wasn’t it IATA that tried to regulate sandwiches rather than the CAB?
From the country that brought you Nord Stream 1 and 2 gas lines to help Russia survive and encouraged the mass migration into Europe, now Germany is worried about the environment?!
How is that possible when Lufthansa operates the largest 747 fleet, certainly in Europe? And how will Germany react to FlixBus (Munich) now the largest long distance bus carrier; and growth of FlixTrain; both destroying their competition?
@Mark
BA operates the largest 747 fleet in the world, and also in Europe
Airlines “most regulated”? What a farce. They’re the least regulated industry out there. Their employees can make up stuff at will, and you can’t even take them to court for it. They promise free flights for 25,000 — and if they don’t give it to you when you get to 25,000, you realize that your basic consumer regulations don’t apply and you can’t take them to court. And on and on and on — the amount of common sense regulation that protects citizens that don’t apply to airlines is ludicrous.
Plus, they’re the most subsidized industry in the US (they don’t even pay the taxes on fuel, and get to use free land to take of and land, as the fees they pay don’t cover the cost of the real estate they use).
Airline price regulation was a disaster, but airlines now are so lightly regulated that the pendulum has swung to the other side. As a consumer I have more protections when buying a toothbrush than when buying a $2,000 flight for my honeymoon.
You’re conveniently leaving out the fact that the proposal only intends to put a punitive tax on any airline tickets under 50 Euros. So anyone flying on a 50.99 ticket is an elite? Got it.
In any case, EU Antitrust enforcement is light years ahead of the US and if the intent of this proposal was to “protect” a domestic business, the European Commissioner for Competition would be all up in the German government’s business before you could say “Herfindahl-Hirschman Index”.
Yikes. This article has so much spin on it, even Federer wouldn’t be able to return serve
I see Gary deleted my original comment, so let me try again and see if I can meet standards on this one.
The fact that Gary is the CFO for the Mercatus Institute, a think tank that largely advocates for free market solutions as being socially optimal in most cases, is at least as relevant to understanding this post as the amount of GHGs putatively produced by the electricity used by porn viewers.
The former is useful for understanding why the take here borders on (if indeed it doesn’t cross over into) hyperbole. The latter is useless except for its shock value. If, as Gary says, “[t]his is naked protectionism using the environment as fig leaf,” then we should expect to see that pushing travellers towards other modes and/or fewer trips would not result in a significant decrease in GHG emissions. Instead we’re presented with a bizarre non sequitur about porn and the assertion of pretext is left entirely unsupported by any useful evidence.
Definitely below the usually higher standard of analysis on this site.
For those who offer ad hominem attacks on Gary rather than dealing with the actual point, the key here is that it is Lufthansa pushing for a policy that is in the interest of Lufthansa. That’s not unusual, but when a policy is cloaked in the name of environmental action but is really for the corporate bottom line, and when the impact falls disproportionately on the less well off, there is nothing wrong with pointing it out.
The best fare I’ve ever booked was 0.00 euros, Madrid to Bucharest on Blue Air. The plane was packed with Romanian workers going home for a short holiday. Announcements in Romanian only. The carrier was doing a promotion and expecting to pick up revenue with checked bag fees and other incidentals, of course. Why shouldn’t the workers be able to have an affordable week home with their families?
@Ben L – I didn’t delete anything, and my analysis stands on its own. In fact that you’ve got to attack my motives rather than my argument I think makes that point.
@propoganda – the fact that the tax applies only to cheap tickets makes my point precisely. Got to keep poor people out of the skies and protect Lufthansa.
@Gary Leff
“I didn’t delete anything”
I apologize for assuming you had. Do you have any idea how my earlier comment disappeared? It was on the site for several hours before vanishing some time last evening.
“that you’ve got to attack my motives rather than my argument”
Gary…I am attacking your argument. Your comparison of Ryanair emissions to online porn emissions as a way of asserting that “[t]his is naked protectionism using the environment as fig leaf” is an extremely poor argument! It would be a better argument if, e.g., there was no real expectation that this policy proposal would reduce GHG emissions because trains are equally polluting or something to that effect. But instead you decided to raise the non sequitur of porn. That’s a bad argument!