Tuesday, July 13, 2010

Bring back airline regulation? Not likely.

To hear Congressman Oberstar tell it, a return to the days of airline regulation is the only way forward that makes sense. Oberstar is proposing (read: threatening) to introduce legislation that would re-regulate the industry if the proposed merger of United and Continental is approved.

Most Americans who grew up in the deregulated era have little perspective on what this would mean. We hear tales of wonderful service, gourmet meals, profitability, and high wages and benefits for airline employees. Luggage was checked for free, pillows and blankets were widely available, and all tickets were refundable.

It sounds nice, and it's true. But there's another side of that coin.

Under regulation, fare prices were set with government approval. They were difficult to change, and in practice, prices among carriers barely varied. They were also much more expensive.

How much more?

Go price a fare of your choosing searching for the lowest available price and write it down. Then, look up the same price as an "unrestricted" or "Class Y" coach fare. That second price--typically three or four times the lowest-available rate today--approximates the regulated fare (1).

During the days of regulation, a cross-country flight was priced in the thousands of dollars. Needless to say, flying was restricted to the wealthy.

Today, that same fare might be $250 on a flexible schedule. Flying is for everyone.

Oberstar is just the latest in a long line of politicians who have made noise about restoring airline regulation. But taxpayers have already pledged their full faith and credit to the tune of hundreds of billions of dollars to bail out America's super-wealthy. Ceding air travel to those same fat cats is just not going to happen.

1 On Continental.com, an August 15-22 EWR-IAH round trip (connecting two hubs) has a lowest-rate fare of $426. The unrestricted fare is $1614.

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