Regulation

Don't Let Protectionists Ruin Air Travel

Competition is the best way for consumers to get better and cheaper flights.

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Though competition is great for consumers—as they get more and better goods and services for less money—some companies dislike the constant pressure it creates for them to stay ahead. When that's the case, it's no surprise when they call on the government to squash annoying competitors. Case in point: the big three U.S. airlines' attempts to limit the pressure by Persian Gulf carriers on their price and quality. Apparently, flying the friendly sky is all about U.S. airlines making money on the backs of their captive consumers.

This all started when Delta, American, and United hatched a big plan to limit flights to the United States by the airline Emirates, Etihad Airways, and Qatar Airways. The intent was to eliminate options for American consumers. Delta, the anti-competition gang leader, hoped to limit the foreign airlines' ability to offer lower prices, as well.

When the American airlines realized they were fighting in vain, they shifted their focus toward preventing the Persian airlines from expanding their routes between U.S. cities and popular international destinations. All told, they spent up to $50 million of their shareholders' cash lobbying for government intervention against competition—but it was all for naught. As it turns out, in spite of the money, this is one of those rare instances when the cronies lost and consumers and competition won the day. Indeed, a recent agreement between the United States and the United Arab Emirates—after a similar agreement in January with Qatar—basically changes nothing and preserves the open-skies agreement, with its market-liberalizing rules, between the two nations.

The Gulf carriers agreed to new financial transparency standards, but no one believes that's what the U.S. carriers were fighting so hard to achieve. The real point of contention was the use of so-called fifth freedom flights, which allow airlines to carry traffic between foreign countries if they begin or end the route within their own nation. The U.S. airlines sought to prevent the Gulf carriers from expanding their fifth freedom routes in the United States, but instead of outright prohibition, they got only an assurance that there were currently no plans to add fifth freedom flights. It's a meaningless statement, seeing as they can change their plans at any time.

What's notable is that despite gaining almost nothing of substance, the protectionists are nonetheless claiming victory.

The director of the White House National Trade Council and leader of the protectionist contingent, Peter Navarro, pounced to declare a freeze on new U.S. routes by the Gulf carriers. He was subsequently forced to walk it back, as no such freeze exists. It's a good thing for consumers that competition is still permitted.

The U.S. airlines couched their cronyism in appeals to fairness, arguing that the Gulf carriers were in violation of open-skies agreements by allegedly receiving government subsidies. Their case was considered weak even before weighing the various subsidies that domestic airlines also receive.

A common error made by protectionists in this and other cases is the presumption that foreign subsidies put the United States at a competitive disadvantage. What's notable about this misunderstanding is that it's often asserted by the same individuals who profess to support limited government and free markets. They believe in free markets, but they don't believe in them enough to trust that they themselves can outperform the less free nations that choose to direct economic resources via political processes.

The common reply is that they believe in free markets as long as they are "fair," but in the eyes of too many, fairness is a euphemism for a lack of competition. It seems much likelier that they don't really believe in markets at all. In the eyes of the protectionist, government must intervene whenever a U.S. industry appears to flounder, regardless of the source or nature of the competition. Navarro, for instance, is fully on board with the president's latest disastrous idea of a 25 percent tariff on auto imports.

The upside to the agreements with Persian Gulf governments to preserve open skies is twofold. First, they preserve competition, which is by far the best way for consumers to get better and cheaper products year after year. Second, they send a strong message to the cronies that their dirty tricks don't always work.

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15 responses to “Don't Let Protectionists Ruin Air Travel

  1. A common error made by protectionists in this and other cases is the presumption that foreign subsidies put the United States at a competitive disadvantage.

    Oh, the horror! Consumers are paying less because foreign governments are subsidizing businesses! Make it stop! People need to pay more! People need to pay more! Pay more!!!!!

    1. But these are awful governments we’re talking about, sarcasmic! Awful! Just, awful! Like, not nice! So instead of saying “thank you, govermments, for screwing your own people so our people can enjoy lower prices,” we should be saying “please liberate us, oh Big Orange Man In The Sky! From these enslaving lower prices and instead screw us, in the name of Making America Grating Again!”

    2. Well we should pay more, and because that disenfranchises the poor, poor people should get free tickets. And because historically minorities were forced to fly in the baggage compartment or the overheads or something like that, they should be able to fly for a massively reduced fair. Vote for me!

    3. Sadly people don’t see it that way. Millions benefit to the potential detriment of a few thousand. The few thousand is also very debatable. Since the foreign airlines would still need the baggage handlers, mechanics, ground crew, air crew etc. the impact on jobs would be minimal at best. What is also silly is many times your ticket on an American airline is actually for a foreign carrier code share. So it has nothing to do with John Doe mechanic losing his job as it is Delta losing revenue.

  2. The only way that trade can be ‘fair’ is for it to be free.
    Too many people equate ‘fair’ with ‘leads to my preferred outcomes.’
    They miss the simple fact that ‘my preferred outcomes’ are only legitimate criteria for trades in which I am buyer or seller. My opinions about the trades others freely engage in is none of my business, literally.

    1. My opinions about the trades others freely engage in is none of my business, literally.

      For Trumpistas, their opinion on who you trade with matter to them and, they will say, should matter to the Big Orange Man In The Sky, if you don’t show enough and sincere commitment to Making America Grating Again. And sincere commitment means sacrificing your wallet to the gods of economic nationalism.

      1. Which differentiates them from the rest of the political class and a vast swath of the public how, exactly?

  3. Economic nationalism is the vessel of choice for protectionist pirates.

  4. It seems much likelier that they don’t really believe in markets at all.

    Trumpistas’ predilection for protectionist schemes, economic decisions based on political expedients and for stiffling immigration shows you that they’re as committed to free markets as Pravda is committed to the truth.

    By the way, you’re absolutely right on the money when you observe that the Trumpista claim –that free markets are only possible when the playing fields are “level”– is not sincere, it is euphemistic and it is dishonest.

    1. And it is not limited to Trump and his fans / supporters.
      Casting it as if it were enables its extension.

      TDS is not a good look on anybody.

      1. It isn’t, but when Ole Mex, or any other person for that matter, accurately casts stones on a particular crony capitalist and his followers, an ensuing chorus of what about ism isn’t a good look either.

      2. Maybe get Trump’s cock out of your mouth, Shirley.

    2. It’s all a matter of perspective. When you look at things from the point of view of the business, or the worker, and you view the economy as a means of producing jobs, then an view that markets must be “fair” is totally honest. When a foreign government subsidizes businesses it creates a playing field that is far from level. It means that domestic workers are unable to compete. And if the purpose of the economy is to create jobs, not goods, then this is indeed very unfair.

      So I don’t think protectionists are dishonest. They’re wrong, but not dishonest.

  5. I can remember landing in Amsterdam in the morning after a transatlantic flight, and seeing the stewardesses from some Middle East airline. I could not believe how attractive these women were.

    1. They follow the 1950’s and 60’s model of Flight attendants. LOL

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