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.