Author Topic: International Airline Competition  (Read 3111 times)

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Offline Sal Atticum

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International Airline Competition
« on: April 05, 2007, 09:31:44 AM »
From the New York Times:
Quote
Flying Toward Competitive Skies
Published: April 5, 2007

International air travel is an example of an industry where arcane, out-of-date rules have held back growth and investment for too long. The deal between the European Union and the United States to modernize and rationalize the governance of the $18 billion trans-Atlantic aviation market is a welcome one for consumers.

But it would have been even better if the Bush administration and Congress could have gone further and opened up the American market to more competition, and the superior service and lower prices that come with it. We hope that politicians will embrace the free-market principles they so frequently tout in the next round of negotiations, and not let protectionist and nationalist sentiments harm consumer choice.

Before the so-called open skies pact, the United States had separate agreements with individual European countries, or in some cases, none at all. As a result, a German airline like Lufthansa could not operate flights from Paris to New York. In the new environment, that kind of intra-European competition will soon be possible ? and should lead to vigorous new entrants in once-sheltered markets.

It is the consumer, cheaper ticket in hand, who benefits. The European Union transport commissioner says he expects that over the next five years the number of passengers flying between Europe and the United States will grow to 75 million annually ? an increase of 26 million. Even a fraction of that would be an enormous gain in business.

But while Americans like to think of Europeans as the stodgy ones with ossified markets, the United States did not go nearly as far in pulling down artificial barriers to competition as Europe did. American airlines will be allowed to operate flights between E.U. cities, say from London to Amsterdam, but European airlines will still be prohibited from flying, say, from Boston to Chicago. And the United States still limits a foreign company to owning 25 percent of voting shares in an airline operating here.

Embedded in these rules is a pessimistic assumption that American airlines would suffer in a competition with foreign ones. The United States has been at the forefront of aviation since the Wright Brothers flew at Kitty Hawk. On the manufacturing side, Boeing has enjoyed considerable success against its European rival Airbus. The industry should go back to thinking like the free-marketeers this country has always encouraged and valued.

The last bolded point is the one I see as important.  Why are we overcontrolling our airlines?  As I understand it (even though I have nothing to back me up right now), aren't are American airlines heavily subsidized and structured by the federal government?  I don't understand how this is supposed to help us have a free, capitalistic market with the lowest price and best service coming out through consumer choice.

Discuss.
JUST EXTRA POLISH. I DO SOME WORK WITH EXCELL SO I KEEP THE CAPS LOCK ON :-P

 

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