Dana Milbank’s Fear of Flying

How lucky can Donald Trump get? He now has another chance to tick off the liberal progressives, and particularly, Washington Post columnist Dana Milbank, who’s probably written more than a hundred anti-Trump columns. All Trump has to do is make sure that Makan Delrahim, his pick to be assistant attorney general in charge of the Antitrust Division of the Department of Justice, plots a free-market course.

Mr. Milbank doesn’t like the way the airlines run their businesses. He thinks Congress can do a better job. Seriously.

“Washington,” Milbank says, “in its wisdom deregulated the airline industry and later looked the other way as it underwent a series of mega-mergers leaving a four-carrier oligopoly controlling 85 percent of the market. And what do we have to show for it? Reduced competition; packed cabins; tiny seats; proliferating fees for food, bags and flight changes; outsourcing of maintenance; boarding delays; higher fares in many cases; labyrinthine contracts that protect airlines rather than consumers; and routine overbooking.

He claims that four carriers are insufficient for competition to work for the benefit of consumers. But what is his evidence for that? How many carriers does he think are necessary? He says the mega-mergers that followed deregulation have “reduced competition.” Yes. And if we had gone from a hundred carriers to ninety-nine, competition would also have been reduced. The question is, how many carriers do you need in order to produce adequate competition? Mr. Milbank hasn’t a clue.

align=”right” Congress, in its wisdom, has given us 92 poverty programs that cost, in 2012, $799 billion (about $9,000 per person or $36,000 for a family of four) and $22 trillion since the inception of the war on poverty. As President Reagan said, we declared war on poverty, and poverty won. And Mr. Milbank wants those same people to run the airline industry?

Then he lists eight or so gripes that undoubtedly annoy passengers, except those who fly in premium classes. What he has forgotten―perhaps he is too young―is that in the good old days of flying it was all premium class. Spacious cabins. Big seats. Hot meals. Fancy cutlery. And lots of personal attention. Verrry fancy.

And very expensive.

Deregulation has enabled many people to fly who had not been able to afford it under the old pre-deregulation command-and-control system. Grandparents can now fly across the country to see a new grandchild or attend a graduation. Or see friends. Or go to a medical specialist. The kind of thing rich people like Mr. Milbank do without thinking.

There are at least two problems with regulation. One is what is known as “regulatory capture.” The industry writes the rules. Nobel Prize-winning economist George Stigler described it as the situation wherein “regulation is acquired by the industry and is designed and operated primarily for its benefit.” Why would Mr. Milbank think otherwise?

But even assuming Congress could write regulations uninfluenced by airline corporations (and that pigs could fly), what is Mr. Milbank’s evidence that Congress could do a better job than the market?

Congress, in its wisdom, has given us 92 poverty programs that cost, in 2012, $799 billion (about $9,000 per person or $36,000 for a family of four) and $22 trillion since the inception of the war on poverty. As President Reagan said, we declared war on poverty, and poverty won. And Mr. Milbank wants those same people to run the airline industry?

Mr. Milbank doesn’t like having to pay a fee for checking a bag. But bag checking costs money. Milbank wants to socialize the cost. He wants passengers who are not checking bags to pay for his checked bag. Why is that an improvement?

And why should someone who has packed his own sirloin steak sandwich have to pay extra so Mr. Milbank can be served a meal? Milbank wants to socialize the cost of meals too.

Overbooking enables the airlines to fill more seats and keep fares lower. It is true that when too many people show up for a flight the airlines should offer passengers whatever cash is necessary to persuade enough of them to give up their seats so the ticket holders who are not willing to take a subsequent flight can be accommodated―instead of dragging them off bloodied and bruised. But is it clear that an inflexible government rule would work better at preventing these kinds of confrontations?

There are other effects of deregulation Milbank doesn’t mention: the decline of small and mid-sized airports. But the problem there is economy of scale: small airports have to spread over far fewer passengers fixed costs like the air traffic control tower, the runway, ticketing, and baggage handling. Who’s going to pay for that? Mr. Milbank would probably say that the government should pick up the tab. He’d socialize that cost too, to the whole U.S. population.

During the Reagan years, the Federal Trade Commission had a slogan: “The market doesn’t have to work perfectly to work better than government.”

Donald Trump, who famously repaired New York City’s beloved Wollman Skating Rink in six months (after the city had tried for five years) probably knows that instinctively. Mr. Milbank apparently has yet to learn it.

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About Daniel Oliver

Daniel Oliver is chairman of the board of the Education and Research Institute and a director of Pacific Research Institute for Public Policy in San Francisco. In addition to serving as chairman of the Federal Trade Commission under President Reagan, he was executive editor and subsequently chairman of the board of William F. Buckley Jr.’s National Review. Email him at Daniel.Oliver@TheCandidAmerican.com.

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14 responses to “Dana Milbank’s Fear of Flying”

  1. Mr Oliver’s analysis is fatally flawed. He writes:

    There are at least two problems with regulation. One is what is known as “regulatory capture.” The industry writes the rules. Nobel Prize-winning economist George Stigler described it as the situation wherein “regulation is acquired by the industry and is designed and operated primarily for its benefit.” Why would Mr. Milbank think otherwise?

    But even assuming Congress could write regulations uninfluenced by airline corporations (and that pigs could fly), what is Mr. Milbank’s evidence that Congress could do a better job than the market?

    However, as we’ve learned from the Chicago Aviation Authority’s security guard (they were not police) thuggery, the airlines have already captured a bigger prize than an executive branch regulatory agency: Congress itself, because their lobbying efforts are so well funded. If you look at the example of the $1350 statutory (not regulatory) cap for involuntarily bumping, that cap was a provision the airlines themselves heavily lobbied Congress for.

    Competition, in East Coast Straussian/Beltway conservative theory as Oliver posits, is good; but it only works when the barriers to entry are low. If you’ve ever looked at the barriers the large carriers put up for things like landing slots and gate space at major airports, you’ll quickly realize the legacy carrier oligopoly has erected massive, anticompetitive barriers to entry.

    Let me give you a cut-and-try example: Southwest Airlines has the world’s largest 737 fleet with over 670 aircraft, yet because of Delta’s influence, they could not get landing slots or gate space at Atlanta’s Hartsfield-Jackson Airport. It cost Southwest $3.4 billion ($1.42 billion cash + $2 billion debt assumption) to basically get into Atlanta when they purchased AirTran (successor to ValuJet) when previously they were frozen out. (There were other benefits, but the prize was the AirTran presence at Hartsfield-Jackson, which was originally divvied up when the other major carrier, Eastern, went under.)
    Circling back around, the “rent seeking behavior” which leads to typical “regulatory capture” breaks down when it morphs with “cubic dollars” into “legislative capture,” as has occurred in the airline industry.
    Dan Schwartz
    Cherry Hill, NJ

    • Actually, the Chicago Aviation Authority’s security personnel are police.

      • No, Sam: They were supposed to stop identifying themselves as “Police” and instead as “Security” on January 1st. Of course, as you saw from the video, at least one was wearing a navy windbreaker with “POLICE” on the back… And I promise you, that has not been lost on the lawyers representing him. (UAL already settled).

      • If they are not “Police”, were they charged with assault and battery?

  2. Milbank is too young to know anything about the airlines before deregulation – he was only seven or eight. I studied aviation management and know that prior to deregulation, airline routes were subsidized by airmail contracts and there was no competition whatsoever, and airline fares WERE VERY EXPENSIVE! After deregulation, new carriers such as Southwest came along and fares were dropped considerably. Yes, people get upset about having to pay for their bags but bags take up space and have to be handled. The other option would be increased fares – for everyone. Incidentally, airline operations ARE regulated by the Federal Aviation Administration and the purpose of those regulations is safety. One of those regulations states that any passenger who refuses to obey instructions from the crew will be removed from the flight and prosecuted.

    • Southwest predates deregulation, as they started flying in 1975 or `76

  3. Deregulation of the airlines is a joke. It is one of the most regulated industries in America. The initial breakup did reduce fares an incredible amount so that air travel became like buses used to be. But creeping regulation has led to regulatory capture. So now we congress mucking up things and leftists arguing that the airlines need more regulation!

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  4. United recently updated their mileage plus / credit card program. 75 miles for every foot you are dragged !

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  5. AND ON CUE… British Airways faces huge compensation bill following IT crash as stranded passengers claim they’ve been left hours without information:
    Domestic and international flights are both affected by the airline’s IT systems going down around the world.

    British Airways could be facing huge compensation costs after thousands of passengers were stranded by a global IT crash.

    After originally predicting delays until at least 6pm, British Airways say the crash will now ground all flights for the rest of the day.

    Delayed travellers are able to claim compensation under EU law, unless the disruption has been caused by factors outside the airline’s control.

    Air travel experts say BA is likely to face a massive cost in lost revenue and payouts to customers whose flights were cancelled.

    Malcolm Ginsberg, editor in chief at Business Travel News, said: “There is no question – the EU denied-boarding regulations will have to apply.

    “They have broken all the rules and they will have to deal with it – it’s going to be a very expensive situation for BA.” (more)

  6. An even bigger problem is the shortage of runways. But back to anti-trust: I dearly hope the Trumpster goes Full Medieval on Jeff Bezos and busts up Amazon, followed by Apple and Google and Microshaft.

  7. During the Reagan years, the Federal Trade Commission had a slogan: “The market doesn’t have to work perfectly to work better than government.”

    Can I get that on a t-shirt?