Why the Justice Department had no “business” interfering with the US Airways, American Airlines merger

The concept of anti-trust laws goes back to the trust-busting days of Teddy Roosevelt. That makes it, literally, a late 19th Century idea that has lost some of its relevancy in an early 21st Century global economy.

When the industrial titans like Carnegie and Rockefeller were building their empires, it was done through one of a pair of prevailing business strategies. In a vertical combination, a business acquired all (or at least a controlling interest) in all of the factors of production. So, a steel company would need to dominate coal and iron ore so that it would be able to set the cost of raw materials to its advantage and deny that same asset to any competitors. In a horizontal combination, an oil company might want to dominate oil exploration and extraction, refining, and distribution. If you own the wells, the refineries and the gas stations, any time money is made on a petroleum product, you’d get paid on each transaction.

Since its creation, the United States was protected from other economic competitors by two oceans, controlling the natural resources of the North American continent meant that you could literally land-lock entire industries. However, “foreign oil” has become a catchphrase in political discourse because that is a global commodity and its trade cannot be controlled by a few robber barons wearing silk top hats in the United States. Now, royalty in very different attire also have a large say in the market price of crude. Federal government action, such as releasing a relative trickle from the strategic oil reserve has no more affect on the supply side than my pressing down on the gas pedal of my over-consuming, V-8 powered, four-door, American luxury car (and I press down often … my contribution to the job market for American oil men).

All of which brings us around to the allegedly deregulated American airline industry.
US Airways Boeing 737
The government does have a legitimate interest in maintaining a safe and orderly domestic airspace. Elsewhere I have commented on the applications of unmanned aerial vehicles (UAVs) and the FAA has released its framework for integrating pilotless aircraft into the system. That is a proper role of government and its nice to see it in front of a burgeoning technology for a change instead of trying to catch up to it.

However, the interaction between airlines, passengers and airports is a dynamic that would benefit from less governmental intrusion and more exercise of free market influences. Even the airports themselves are a hybrid of a governmental resource, acting like a business, guided by an advisory board of interested citizens who hire a professional manager. The various airports engage in advertising to attract passenger throughput just as the airlines do. The airports also compete to attract the air carriers so they can offer a menu of options to potential customers. The customers also engage in free market, picking among various combinations of airports, airlines, and flight itineraries so they can get the best deal that meets their wants and needs. With all of the online booking sites, airline seats have become commodities, traded almost as easily as baseball cards. These competing influences push and pull to create a dynamic equilibrium that undergirds flight routes and times, capacities of aircraft assigned, the range of services provided to customers and eventually the revenues earned by the airlines and their airports.

Note that I said, “earned.” Airlines that do not offer the flight schedules and services customers want should earn less. Airports that do not have well-run baggage systems (recall Denver International’s infamous opening weeks) or convenient parking facilities should get less support from customers.

In the interest of full disclosure, this story hits home to me because of the dowry that US Airways and American Airlines had to place on the altar of the imperial government to be granted the permission to wed. A sacrifice was required and gates and routes serving New York’s LaGuardia and Washington, D.C.’s Reagan National had to be relinquished “to be fair” to other airlines like Southwest and other discount carriers. Setting aside the observation that this merger would create a de facto premier national air carrier for the United States as other nations have had (There are British Airways, Air France, Sweden’s KLM, Japan’s JAL and even Russia has Aeroflot.), this Federal interference in free enterprise screws with my travel plans.

There is an old joke that still circulates down here in Florida. It goes like this:

A priest makes a call on a sick man who is lying on his deathbed in Panama City. Concerned for his immortal soul, the priest asks the old man, “My son, do know if you are going to Heaven or Hell?”

“I ain’t sure,” the old-timer replies, “but I know I gotta change planes in Atlanta to get there!”

That’s the way it had always been for me, Delta to Atlanta and then, a few hours later, on to where I really wanted to go. Then, once I moved to central Florida, the airline changed and so did the punch line. Just plug in USAir and Charlotte. As a somewhat regular thing, I’ve either had meetings in D.C. or, as a semi-annual instructor for FEMA at its Emmitsburg, Maryland, campus, I made that run often enough to have a “preferred airline” and also an airport of choice.

Dulles is a great facility but a bit out of the way if you’re going downtown. You have to rent a car and recall how to get from here to there. BWI (the Baltimore-Washington International) always seemed to have me delayed taking off in the summers, inevitably making me miss the Charlotte connection. This would require me to use a courtesy razor and toothbrush from the provided hotel before putting on yesterday’s clothes again for last leg home.
Reagan Washington Airport sign IMG 3996
Ah, but Reagan National, there’s magic in the very name. It’s only an escalator ride to get to excellent DC Metro system and that’s all you really need if your business is in the city. Even if going outside the District on a teaching assignment (or to visit the future ex-in-laws), I knew that after my labors, I could plan my flight to home to after a pleasant half-day at the National Air and Space Museum or the Hirshhorn Gallery.

There is the crucial difference. As a user of a free market system, I could choose what and where and how to fly, making my experience work for me. There’s some of that enlightened self-interest that ol’ Adam Smith wrote about back in the day. Not only could I eke out a little pleasure at the edge of my business, I could bank the frequent flier miles (a reward freely given by the airline because of my customer loyalty) to use at some unknown date when I would have free time for a pleasure trip. Now, the Federal government has decided that a system that was working just fine has to be punished because it wants to be stronger and more successful.

I wonder if Aeroflot has flights to Las Vegas …

About drronthomasjr

Dr. Ron Thomas, Jr. heads Thomas Consulting Group, a consortium of professionals in leadership, crisis management, and media relations.
This entry was posted in Politics and tagged , , , , , , , , , , , , , , , , , . Bookmark the permalink.

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.