Customers Want Cheap flights, not Congressional Regulation of Airlines


Customers Want Cheap flights, not Congressional Regulation of Airlines

Airline deregulation has led to more flights at lower prices.

From a brawl aboard a plane at Burbank Airport to the disturbing video of United Airlines having a passenger dragged off one of its flights, airlines and air travel are under heavy scrutiny.

In response to the United incident, members of Congress introduced a bill to prohibit passengers from being involuntarily bumped from overbooked flights and Sen. Richard Blumenthal, D-Conn., proposed a passenger bill of rights. But before Congress passes new legislation, it’s important to remember why we deregulated airlines.

Before 1978, the airline industry was heavily regulated by the Civil Aeronautics Board, which controlled fares, routes and entry of new airlines. New routes took years to gain approval. It took a court order for Continental Airlines to be able to offer service from Denver to San Diego, for example. In some ways, airlines liked this regulation because it guaranteed them profits.

The Airline Deregulation Act signed by President Jimmy Carter in 1978 forced airlines to compete against each other and delivered several major benefits to the public. Most notably, it lowered the cost of flying. Low-cost carriers like Southwest entered the market. Adjusted for inflation, airfares today are almost three times cheaper than they were in the 1970s. As a result, air travel became more accessible and increased. In the 1970s there were fewer than 6 million flights. Today there are almost 10 million.

Today, the number one priority for airline customers is the price. Yes, customers complain about flight delays, airlines charging fees for baggage or to change flights, dwindling legroom and more. But survey after survey shows air travelers prioritize low ticket prices above all else. As a result, airlines, especially legacy airlines like American, Delta and United, have added seats to their planes to squeeze more people onto every flight. These additional seats mean less legroom for passengers, more money for airlines. Airlines have eliminated free meals on most flights and baggage fees have become commonplace. That’s because as much as passengers hate them, most flying decisions are based on the base ticket price.

In most cases, customers still have choices. You can choose a more expensive airline with more legroom or amenities. Many airlines offer upgrades to economy comfort or first class for customers willing and able to pay for it. Meanwhile, many people choose one of the ultra low fare airlines (Allegiant, Frontier and Spirit), where base fares are often $50 or less, with no amenities offered.

The United debacle shined a light on overbooking — airlines selling more tickets than there are seats. For each flight, airlines know a certain number of customers won’t use their tickets. If airlines couldn’t overbook, then ticket prices would increase for all customers as the airlines hedge against empty seats. The United fiasco wasn’t an overbooking problem; it was a customer service problem. United should’ve kept sweetening its offers until it had people willing to give up their seats on that flight.

Getting bumped is not a pleasant experience, but, fortunately, it only happens to a small number of passengers. Just 0.008 percent of travelers were bumped in 2015 — that’s eight people out of every 100,000. Further, since this United Airlines mess, United has reevaluated its policies and other airlines have proactively increased the amounts that they will pay to entice customers to give up seats on overbooked flights. Delta, for example, says it will now offer customers up to $9,950 for involuntary bumpings. It’s hard to imagine that they’ll have trouble finding people to give up their seats at that price.

Customers can show their displeasure with United or other airlines by flying on their competitors. If Congress uses this incident to regulate airlines, the new laws might prevent isolated incidents like this from occurring, but may also lead to higher fares. If travelers make purchasing decisions based on customer service or legroom, it will send signals to airlines and they will adapt. Congress should stay out of it.

Baruch Feigenbaum is assistant director of transportation policy at Reason Foundation.