Friday, February 23, 2007

Airlines can't fly with the dead hand at the stick

From The New York Times:

JetBlue’s horrendous performance during the recent ice storms that paralyzed New York City’s airports has reinvigorated calls for a “passengers’ bill of rights” to protect air travelers against what can only be deemed abusive treatment. JetBlue has moved rapidly to make amends, but its shocking failures and those of other airlines in recent months make a federal law the best solution.

What the editorial writer misses is that a for profit business will lose far more in lost business than any fine from the federal government could take from them and they will spend far more in advertising to counteract the bad publicity this incident generated than any government fine would cost them.

As a for profit business JetBlue doesn't survive unless it attracts and holds customers and to do that they must provide a level of customer service which their customers will consider appropriate to the price they pay. If JetBlue fails in this the customers will go elsewhere and JetBlue will go into receivership.

These facts are why business is always more efficient and responsive than government agencies and they are why no "passenger's bill of rights" is needed.

If the legislature steps back and lets the market handle this situation then airlines will have to compete with each other to provide the best guarantee of good service during these kind of incidents. If the legislature steps in and establishes a minimum standard then every airline will meet that minimum standard and do no more. They will hide behind the law and use it as an excuse for not doing anything "above and beyond".

For example, as things stand now there is no law limiting the amount of time passengers can be kept on a grounded plane. JetBlue says that now passengers will be allowed to deplane after five hours. American Airlines, which had a similar incident last December, says that its passengers can get off their planes after a four hour delay. American charges more money than JetBlue so its passengers demand a higher level of service. However if the new law says that passengers have to be deplaned after five hours then American will change its policy and use "its the law" as their excuse.

If Congress avoids laying the dead hand of government on the entire industry then some other carrier will announce that its passengers will be set free after only three hours and American and JetBlue will be forced to consider lowering their time limits as well.

This is how competition in a system of free market capitalism works. Businesses are constantly forced to increase service or lower price, or both, to retain, or grow, their share of the market. Monopolies and cartels are forbidden because they remove that pressure and allow businesses to reduce service while raising price because the customer is denied the choice to take his business elsewhere.

The airlines would love to get together and hammer out a minimum standard of acceptable service so that they would not have to spend large amounts of money competing with each other. However if they did this they would be in violation of anti-trust laws. It would be a serious error for Congress to allow themselves to be used as a proxy for a bunch of airline executives in a smoke filled room.

Do not deny air travelers the improvements in service which will emerge from the battlefield of competition.

PS - For those of you who remain unconvinced that government control of the airlines is not the answer I remind you of the days before the Berlin Wall fell when the highlight of every Paris Airshow was watching the Soviet airplanes disintegrate in midair.