We are in the age of "smart regulation," and have been for about 40 years. Prior to the 1970s and 1980s, you had government regulation that tried to micromanage markets (as the article explains, regulating "prices and routes"). Airline regulation was representative: the airline told you what you could charge, where you could fly, what your customer experience had to be, how much profits you could make, etc. The problem is that the government was terrible at making these sorts of decisions.
In the late 1970s through the 1990s, we rolled back that sort of regulation all across the economy. Instead of micromanaging prices and routes, we refocused the government on regulations like safety and maintenance standards. And it was a huge success: http://www.econlib.org/library/Enc1/AirlineDeregulation.html. So much so that Europe copied it: http://www.economist.com/node/146627. It's not just because ticket prices are way cheaper than they used to be (though it's partly that). Carriers like FedEx and UPS (and companies that depend on them, like Amazon) wouldn't have been able to exist under the previous model where bureaucrats micromanaged the air cargo industry.
The article isn't espousing "smart regulation." It's asking for the government to get back into the business of micromanaging prices and service:
> There should also be rules on how many passengers an airline can cram into a plane, and what extras it can charge for. And there should be limits on price gouging. It makes no sense to allow airlines to charge an astronomical fare just because a flight is nearly full, and a dirt-cheap fare for an advance booking.
There is no economic rationale for the government to tell airlines what extras they can and cannot charge for, any more than there is for the government to tell app or game developers what kinds of DLC they can charge for.
Airline service is crappy for the same reason pop music and fast food are crappy. People are willing to give up almost everything in the way of amenities in return for saving a few bucks on the ticket price. It's not the government's place to tell them they shouldn't do that.
>Airline service is crappy for the same reason pop music and fast food are crappy. People are willing to give up almost everything in the way of amenities in return for saving a few bucks on the ticket price. It's not the government's place to tell them they shouldn't do that.
The decline in quality has two major causes - people not willing to pay for it, and people comparison shopping by headline ticket-price. If it was just the first, the airlines wouldn't offer the option on flights, since nobody would pay for the extras. Airfare is heavily commoditized by comparison shopping, in that many levels of service get lumped into the same bucket and are considered equivalent.
I suspect that if airlines were allowed to offer a discount for not checking a bag, that amount would be smaller than existing checked-bag fees.
It is the government's place to regulate how prices get advertised. Standardizing service levels and requiring airlines to provide something like a "one checked bag + in-flight meal" price would likely ameliorate these issues.
In short, I'm arguing that discovering how much you can be expected to be charged for the in-flight extras you want is too difficult under the current system. This is a market design failure.
> It is the government's place to regulate how prices get advertised.
Indeed, the government has already done this, to mandate that advertised prices are all-inclusive, with all the taxes, fees, charges and so on included in the advertised price you see when you're searching for tickets. Before that regulation, airline tickets were more like phone bills where the taxes, fees, charges, tolls, surtaxes, surcharges, sur-fees, and so on mean you pay $65/month for a "$40/month" plan.
>And there should be limits on price gouging. It makes no sense to allow airlines to charge an astronomical fare just because a flight is nearly full, and a dirt-cheap fare for an advance booking.
This would just result in higher (probably much higher) ticket prices for the vast majority of people. Breaking passengers up into fare classes based on how much they're likely willing to pay for a ticket is one of the most fundamental ideas behind ticket prices.
If the goal is to go back to the '70s, count me out. Back then flights were so expensive planes were full of two kinds of passengers: rich people and company executives. I hate flying, but I'd like for it to be an option if I'm in a hurry.
In the late 1970s through the 1990s, we rolled back that sort of regulation all across the economy. Instead of micromanaging prices and routes, we refocused the government on regulations like safety and maintenance standards. And it was a huge success: http://www.econlib.org/library/Enc1/AirlineDeregulation.html. So much so that Europe copied it: http://www.economist.com/node/146627. It's not just because ticket prices are way cheaper than they used to be (though it's partly that). Carriers like FedEx and UPS (and companies that depend on them, like Amazon) wouldn't have been able to exist under the previous model where bureaucrats micromanaged the air cargo industry.
The article isn't espousing "smart regulation." It's asking for the government to get back into the business of micromanaging prices and service:
> There should also be rules on how many passengers an airline can cram into a plane, and what extras it can charge for. And there should be limits on price gouging. It makes no sense to allow airlines to charge an astronomical fare just because a flight is nearly full, and a dirt-cheap fare for an advance booking.
There is no economic rationale for the government to tell airlines what extras they can and cannot charge for, any more than there is for the government to tell app or game developers what kinds of DLC they can charge for.
Airline service is crappy for the same reason pop music and fast food are crappy. People are willing to give up almost everything in the way of amenities in return for saving a few bucks on the ticket price. It's not the government's place to tell them they shouldn't do that.