Friday, December 17, 2010
The Future of Aviation Advisory Committee has posted its full presentation to Secretary of Transportation Ray LaHood here. The recommendations cover, inter alia, air transport issues relating to the environment, finance, competiveness, viability, labor, and safety. While there are a number of good ideas contained in the report, in the area of trade in air services, the recommendations left much to be desired.
In essence, the recommendations reaffirmed the tenets of the 1995 U.S. International Air Transport Policy Statement, 60 Fed. Reg. 21,841 (May 3, 1995), which--though remarkably progressive for its time--fails to address important issues such as crossborder mergers, air carrier access to global capital markets, and the full removal of entry barriers to the U.S. market. Instead, the recommendations focus on exhorting the DOT to "strengthen the competitive position of [U.S.] air carriers to at least ensure equality with foreign air carriers," a mandate which could easily be misconstrued as encourging the government to directly manage the competitive process of the international market.
Tuesday, December 14, 2010
The Future of Aviation Advisory Committee, a special task force created last April to advise U.S. Transportation Secretary Ray LaHood on challenges facing the air transport industry, is scheduled to issue its recommendations tomorrow afternoon. See Press Release, U.S. Dep't of Transp., Future of Aviation Advisory Committee to Hold Final Meeting Dec. 15 (Dec. 13, 2010) (available here). Further information on the FAAC, including a full description of its mandate, is available here.
One area the FAAC is charged to examine is "balancing the [airline] industry's competitiveness and viability." The unfortunate implication of this phrasing is that "competition" and "viability" are mutually exclusive ends. This is false. A competitive marketplace is both good for consumers and the airlines, but only if authorities in Washington wield their regulatory control sparingly. Attempting to create an artificially "competitive" market by blocking mergers yields waste and undercuts sustainability. Moreover, "viability" is difficult to achieve at the international level when U.S. airlines are barred by ownership and control rules from accessing global capital markets. Tack on regulations covering everything from passenger rights to advertising and what you have is an excessively costly operating environment for U.S. carriers.
Blog readers may be interested in reading Jan K. Brueckner et al.'s new paper, City-Pairs vs. Airport-Pairs: A Market-Definition Methodology for the Airline Industry (Oct. 2010) (available here). From the abstract:
This paper provides a methodology for deciding which airports warrant grouping in multi-airport metropolitan areas. The methodology is based on the comparability of incremental competition effects from nearby airports on average fares at a metropolitan area’s primary airport. Results from a quarterly panel data set for the period 2003-2009 provide strong evidence that city-pairs, rather than airport-pairs, are the appropriate market definition for analyses of passenger air transportation involving many (but not all) large metropolitan areas. Based on the proposed method, we offer a recommended list of airports that should be grouped when creating city-pairs for the analysis of competition in the U.S. domestic airline industry.
Monday, December 13, 2010