Listen as Larry spoke with Marc Scribner, a senior fellow at the Competitive Enterprise Institute, about his article, Want Better Airline Service? Deregulate to Enhance Competition.
An excerpt of Scribner’s article, Want Better Airline Service? Deregulate to Enhance Competition, can be found below:
United Airlines is taking a public relations beating for its, er, remarkably poor customer service. This has spurred a flurry of uninformed calls for more government regulation of airline practices. Derek Thompson in The Atlantic has a point that the federal cap on overbooking compensation for involuntary removal (codified at 14 C.F.R. § 250.5) should be eliminated. But this doesn’t get to the heart of the matter: why would a service provider’s employees feel comfortable treating a customer so poorly?
The answer is they face greatly reduced competitive pressures thanks to government policy. Since the Air Commerce Act of 1926, federal law has imposed ownership and control restrictions on U.S.-flag airlines. These restrictions were tightened under the Civil Aeronautics Act of 1938. Under current law, the maximum foreign ownership and control share of U.S.-flag airlines is 25 percent (see 49 U.S.C. § 40102(a)(15)(c) for the relevant definition of “citizen of the United States”). This is why Richard Branson only held 25 percent of Virgin America prior to its sale to Alaska Airlines. The rest was owned by a New York hedge fund. [Read More]
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