Is There Rationale To Justify Federal Government Action?
The Business Travel Coalition (BTC) today applauded Senator Richard Blumenthal’s (D-CT) initiative to address the airline seat-squeeze problem that some 2 million consumers face each day by either being shoehorned into shrunken personal space or being forced to pay extra for a degree of comfort. The U.S. Department of Transportation (DOT) should organize a study that relates a seat pitch standard to the size of today’s passengers among the traveling population.
Much of the airline industry was deregulated, so is there rationale that would support the bills and amendments being proposed by Members of Congress for seat standards? Materials from the statement of purpose in the Airline Deregulation Act of 1978 (ADA) and from the U.S. Department of Justice (DOJ) complaint of August 2013 with respect to the American Airlines-US Airways merger would appear to provide rationale for Congressional intervention.
In subsection (3) of the ADA a purpose was the availability of “adequate... services by air carriers.” Taking a practical view, one could consider that “adequate” means more than just the number of flights or seats but also the provision of services with a modicum of physical comfort – or a minimum lack of discomfort – without having to pay extra. Subsection (7) has as a goal the avoidance of excessive market domination that could lead carriers to reduce service. Certainly, given the current market shares of the 4 large carriers passenger service levels have been reduced as seats have been shrunk.
With regard to the DOJ complaint, in many ways it was a critique of how the airline industry had measured up against the purposes of the ADA. The excerpts below from the DOJ complaint highlight that in fact the large carriers have reduced service “in tandem” and refer to a reduction in “amenities.”
Excerpts from the ADA (49 USC Section 1301)
"(3) The availability of a variety of adequate, economic, efficient, and low-price services by air carriers without unjust discriminations, undue preferences or advantages, or unfair or deceptive practices, the need to improve relations among, and coordinate transportation by, air carriers, and the need to encourage fair wages and equitable working conditions.
"(7) The prevention of unfair, deceptive, predatory, or anticompetitive practices in air transportation, and the avoidance of—
"(A) unreasonable industry concentration, excessive market domination, and monopoly power; and
"(B) other conditions; that would tend to allow one or more air carriers unreasonably to
increase prices, reduce services, or exclude competition in air transportation.
Excerpts From DOJ Complaint In The Challenge To The AA/US Merger
…Since 1978, the nation has relied on competition among airlines to promote affordability, innovation, and service and quality improvements. In recent years, however, the major airlines have, in tandem, raised fares, imposed new and higher fees, and reduced service. Competition has diminished and consumers have paid a heavy price.
3. This merger will leave three very similar legacy airlines—Delta, United, and the new American—that past experience shows increasingly prefer tacit coordination over full-throated competition. By further reducing the number of legacy airlines and aligning the economic incentives of those that remain, the merger of US Airways and American would make it easier for the remaining airlines to cooperate, rather than compete, on price and service.
35. Increasing consolidation among large airlines has hurt passengers. The major airlines have copied each other in raising fares, imposing new fees on travelers, reducing or eliminating service on a number of city pairs, and downgrading amenities.
 All references to page numbers are to the numbered page of the complaint. The numbers in front of each passage quoted are the numbered paragraphs of the complaint.
“Airlines say that if consumers don't like something they can vote with their wallets. When 11 airlines controlled 80% of domestic seat capacity that was a plausible argument. Now that it's down to 4 airlines, many consumers’ votes have been taken away - especially in small and mid-sized communities,” stated BTC founder Kevin Mitchell. “As most economists agree, some markets work well, some not so well and some not at all. From a consumer's point of view, the marketplace for commercial airline services is somewhere between the latter two as evidenced by the 10 examples of unfair and deceptive airline practices that BTC recently drew up (http://btcnews.co/1YbkC53),” added Mitchell.