Whenever an industry spends millions in Washington demanding that government impose "fairness" on the marketplace, taxpayers and consumers should grab hold of their wallets. That's exactly what domestic airlines are doing through efforts to block foreign competitors' access to the American market.
Delta, American and United Airlines have joined hands with big labor unions to demand that the Obama administration renegotiate Open Skies agreements – which ensure low barriers to airlines doing business across borders – in order to limit competition to American air routes. They have formed a group called Americans for Fair Skies to argue that government subsidies of foreign competitors create an unfair playing field, and have convinced many members of Congress to endorse intervention.
This cynical appeal to protectionist impulses ignores several important facts, and if successful would prove both harmful to the economy and costly for consumers.
Americans for Fair Skies argues that because Gulf State carriers like Emirates and Qatar Airlines receive assistance from their governments, American airlines are not competing on a "fair" playing field. Left out from their arguments is the fact that the American airline industry has benefited from billions in handouts funded by American taxpayers.
According to a 1999 Congressional Research Service report made public by Wikileaks, the U.S. airline industry benefited from $155 billion in direct federal subsidies between 1919 and 1998. The domestic airline industry later secured about $18.6 billion from the government in 2001 after the Sept. 11, 2001 attacks, and has even benefited from the export subsidies of foreign governments.
It is thus rather remarkable to see airlines claiming that only foreign airlines benefit from government support, much less that it is “unfair.”
If Americans for Fair Skies get their way and successfully limit the access of foreign competitors to American markets, consumers will suffer in the long run with higher prices and fewer services. Regardless of whether competition comes from home or abroad, the more of it there is, the greater the pressure to improve quality and efficiency.
Americans are increasingly frustrated with an airline industry that seeks to nickel and dime them at every stage in the travel process. Want to bring more clothes than can fit within ever shrinking requirements for carry-on luggage? Pay a fee to check a bag. Need to change flights? Get out your wallet. Want to pick a seat a normal human being can actually fit in? There's a fee for that, too.
Competition is the only thing that will end these burdens. Southwest Airlines has already carved a niche by not charging for baggage and providing a low cost business model that others are copying. But there's no guarantee that process will spread throughout the market. A regression toward protectionism and reduced competition, however, will certainly reduce the likelihood of continued improvements for consumers.
Delta has rightly argued against cronyism and government handouts in the case of the Export-Import Bank, which subsidizes foreign companies purchasing American exports. But that's because those handouts harm their own business, not because of any principled opposition to government favoritism.
Now they want the government to step in on their behalf. Of course, they couch the request under the guise of righting a wrong and bringing “fairness” to the market. But all businesses seeking handouts make that argument, leaving government to pick and choose who to help based on non-market factors like political influence. That's why freedom and non-intervention is the best way to ensure real fairness in the market.
It's never a good idea to compound one bad policy with another. Even if foreign governments falsely believe they can promote growth through subsidies and interventions, it is foreign taxpayers who suffer the most from that error. Responding by closing markets and tightening controls would only force Americans taxpayers and consumers to suffer along with them.
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