The airline business always has been cyclical, and it is useful to
remind ourselves of this from time to time, lest we take things for
And so it is with government policies, including those that
apply to airline regulation (or the lack thereof). These, too, go
in and out of fashion, although the rise and fall of political fads
hasn't always coincided logically with the ups and downs of the
business cycle. But no matter. Change is upon us, and we must be
Today's challenge is to make sense of the Transportation
Department's effort to enunciate an "Enforcement Policy Regarding
Unfair Exclusionary Conduct in the Air Transportation
The proposed policy is this: The DOT will regard it as an unfair
practice if a major carrier overreacts to a low-fare initiative by
a "new entrant" by dumping so many cheap seats on the market that
it generates lower revenue for the major than would "a reasonable
The proposed policy defines a "new entrant" as an airline less
than 10 years old, which appears to mean that two old incumbents --
say, Northwest and Delta -- can beat their brains out in a $19 fare
war against each other without running afoul of the government.
The proposed policy doesn't define a "reasonable alternative
response," except to suggest that perhaps major carriers should
match the low fares of a new entrant "on a restricted basis and
without significantly increasing capacity."
This is an interesting turn of events from a government agency
that, a few years ago, was accused of fostering a laissez-faire
attitude toward mergers that had left the field dominated by
mega-carriers and littered with the remains of forgotten upstarts
like Muse Air, Jet America, Air One, Air Atlanta, Presidential
Airways and Best Airlines -- poor devils.
There's probably nothing wrong with encouraging free and fair
competition, and the DOT is getting praise for trying to do that.
Rightly so. Hear, hear, and all that. But is this policy the way to
What's wrong with all this, of course, is that the airlines--the
deregulated airlines--are being subjected to a double standard that
doesn't apply to other industries. We were told 20 years ago by the
authors of the Airline Deregulation Act that the airlines,
eventually, would enter the promised land of the American
marketplace and would be treated "just like any other
The government is reneging on that promise. If the airlines are
guilty of violating the antitrust laws, then the Department of
Justice should screw up its courage, do its homework, and haul the
airlines into court and sue them, just as it does with chip
manufacturers, automobile dealers, concrete contractors, furniture
makers and what-have-you.
Instead, the DOT clings to "our mandate to prohibit unfair
methods of competition," and claims that it is empowered "to stop
air carriers from engaging in conduct that can be characterized as
anticompetitive under antitrust principles even if it does not
amount to a violation of the antitrust laws." So it's not enough
that airline managers have to abide by the antitrust laws, they now
have to refrain from conduct "that can be characterized as
anticompetitive" by DOT bureaucrats.
We like those warm and fuzzy low-fare new entrants as much as
the next guy, but this "mandate" sounds like a hunting license,
issued by the department of political correctness.