Yesterday Robert Crandall, former chairman of American Airlines, appeared on CNBC (see it here) to advocate federal regulation of the airline industry. He also wrote an Op-Ed for the New York Times on the subject. Mr. Crandall is old enough to remember when airlines were regulated before, and despite his own successes under deregulation, he obviously remembers them as the good old days.
He spoke lucidly, showing no signs of senility, but his logic left me puzzled to say the least. He first pointed out that the airlines had difficulty making money when oil was $10/barrel, and still have difficulty when it is $117/barrel, so that wasn’t his reason. He pointed out that the air traffic control system is seriously inadequate, using outdated technology, and Congress was unable to agree on how to fund improvements. He then expanded his scope by pointing out that our highway infrastructure is a disaster, bridges are falling down, and we don’t have a rail system worthy of the name. His solution? The federal government needs to step up and do some serious “planning”.
Never mind that central planning worked so exquisitely well for the Soviet Union, let me see if I can unravel his logic. The air traffic control system (still run by the federal government) has major problems. The highway system (socialized for at least as long as Mr. Crandall can remember) is crumbling. And the ineffective rail system, called Amtrak, has been subsidized by the federal government for years. Obviously, therefore, if it’s hard for the airlines to make a profit in a “free” market, that same federal government should take over!
At least Mr. Crandall’s memory is not faulty. In his “good old days” of airline regulation, they did make a profit. Fares were outrageous, service was atrocious, and unprofitable routes were heavily subsidized, but airline managers could be fat, dumb, and happy and still make a profit. What Mr. Crandall is asking for is known as “rent-seeking”. Just like the electric utilities 100 years ago, Mr. Crandall has realized that competition is tough. Corporate welfare and protectionist legislation make life much easier – at least for industry fat cats. But as a passenger, I’d much rather let the airlines compete for my business.
As for the rest of our transportation woes, why don’t we fire the failures, instead of raising taxes and throwing good money after bad? Privatize air traffic control, airport operations, and especially that abominable TSA. Sell off the highway system – privatized toll roads are showing great promise. Finally, quit propping up Amtrak, and let the industry figure out how to run a railroad.