Ongoing Government Failures in Air Transportation

June 7, 2012

Despite gradual success at reform, there are still pockets of powerful government intervention in the air transportation sector.  Purporting to be at the service of consumers and creating market-optimal airlines, these regulations have the actual effect of distorting airlines' behavior and harming customers in the long run, says Kenneth Button, a professor at George Mason University.

This can be seen in attempts to reduce airlines delays.

  • The Department of Transportation's (DOT) Bureau of Transportation Statistics requires airlines to report delays of 15 minutes or more to the Bureau, which then publishes them to encourage transparency for customers.
  • Private sector actors are just as capable and incentivized to provide this information to consumers: websites such as Kayak, Expedia and Priceline speak to this capacity.
  • This also promotes the tendency on the part of carriers to "pad" schedules so delays appear less frequently to passengers.
  • There is also evidence that airlines have an increased proclivity to cancel flights rather than record delays.
  • In addition, even the type of information is less than useful; for instance, travelers care far more about delays in arrival than delays in departure.

Federal regulators have also sought to impose special rules on multihour tarmac delays.

  • Carriers can be fined for holding passengers on the tarmac for extended periods.
  • They also face special provisions for passenger safety, such as being required to serve refreshments after two hours of delay.
  • The economic response of airlines has been to hold back flights at the gate or to cancel them.
  • According to the U.S. Bureau of Transportation Statistics database, canceled flights rose from 1.26 percent to 2.01 percent between 2009 and 2011.
  • This is usually a suboptimal outcome for passengers, who must arrange new flights or cancel trips entirely.

Federal authorities have also sought to impose ticket pricing transparency on carriers by forcing them to publish comprehensive total cost figures in advertising efforts.  This regulation has the effect of hiding the contributions of state and local taxes to high ticket prices, which were previously much more obvious to consumers when they were separated from the total cost.

Source: Kenneth Button, "Ongoing Government Failures in Air Transportation," Mercatus Center, May 17, 2012.

For text:

http://mercatus.org/sites/default/files/Ongoing-Government-Failures-In-Air-Transportation.pdf

 

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