Every year at major holidays and when severe weather rolls across the nation, the
airline
industry becomes the punching bag of politicians, especially progressive politicians, and members of the public who do not understand basic economics.
This past Christmas was no different. The airline industry suffered extreme disruption due to a major winter storm. It was Christmas. Lots of people were traveling. I flew during the holiday period, and both of my flights were full. And yes, flights were delayed, flights were canceled, but under the circumstances of a once-in-a-generation storm, the airlines and airports performed admirably.
But given human nature and politicians with ambition, the combination of terrible weather and packed flights provided the perfect mixture for passenger and political complaints. Much of the criticism was completely unwarranted. The U.S. airline industry is a crown jewel of the country. Every day, America’s airlines provide service to more than 45,000 flights and 2.9 million airline passengers across more than 29 million square miles of airspace. In 2023, almost
one billion
passengers will board flights in this nation. Passengers move across the country efficiently and safely, and flying is the safest form of transportation.
Flying is also cost-effective. For distances over 1,000 miles, the median cost per mile for air travel is
14 cents
. Only bus travel is cheaper at 12 cents per mile.
I generally praise the airline industry, but I do not praise Southwest. What happened at Southwest over the holidays was a true fiasco. Flying operations collapsed, and Southwest confirmed that its systems to coordinate airplanes and flight crews failed. The company under-invested in systems technology. Management of the company acknowledged its mistakes. But that is not sufficient. The senior members of management should resign and the board of Southwest should take control of the airline in the short term. Saying “sorry” is not enough. If management does not resign, then institutional shareholders should vote against the board and demand changes. Let the market work. If consumers are sufficiently outraged, they can boycott Southwest. What is important is to let the market work its magic; investors will punish the airline by selling the stock or by not buying the company’s shares. Keep government interference to a minimum.
Politicians make a mash of it when they become involved in the day-to-day operations of businesses, including the airline industry.
Politicians practice cronyism
favoring certain airlines over others. Politicians favor airline unions over the public. By definition, any union with market power will raise wages for its members above the market clearing price. When politicians are involved, the cost of flying increases. Today, in real inflation-adjusted terms, airfares are
50% cheaper
than the fares prior to deregulation.
Consumer demand is sensitive to prices., and, under the current pricing structure, more people can afford to fly. That is the point of deregulation and free markets, consumer welfare and overall economic efficiency. If seats become larger and more amenities are provided, then the cost of tickets will increase; consequently, fewer people will fly. Let the market work, and keep government out of the day-to-day operations of the airline industry.
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James Rogan is a former U.S. foreign service officer who later worked in finance and law for 30 years. He writes
a daily note
on finance and the economy, politics, sociology, and criminal justice.
