Douglas & List, Deregulation did not *cause* suspension of enforcement of anti-trust laws. However, the approach to anti-trust enforcement was radically different in the Reagan administration than in the Carter (and Nixon and ...) administration. We also went through a "big is good" period in the 70's, only to find that big was inefficient; yet we are back to it again. Maybe our banks are too small ( the mergers seem to be the Revenge of the Rust Belt :-) ), but my guess is that we will have to break up Standard Oil again. I find your second sentence curious, given the rather lame (IMHO) defense of Microsoft that "the consumer has not been hurt," which tacitly admitted that Microsoft had illegally (IMHO) run roughshod over its competition. But back to airlines: The merger of Republic and Northwest eliminated any competition in the major hub cities of Minneapolis and Detroit -- go through Minneapolis and count how many gates NW has. There have been other questionable airline mergers, but I don't think any airline merger beats the NW - RE one. Yes, this was reviewed, but a top accounting firm gave Enron a clean bill of health too. One could posit that monopolies have the potential to be more efficient than competition; therefore, DOJ should promote monopolies, but anti-trust legislation arose from the harmful effects monopolies had on consumers. The subsidy given carriers before deregulation was the mail subsidy -- (over?)payment for carrying the mail. I don't know if such a subsidy still exists, but airlines still carry mail and they don't do it for nothing. The main feature of regulation was that the game was fixed so that a reasonably run airline would make money -- bankruptcy was still possible. Under regulation, airlines were able to petition the CAB to cut or drop service from cities unable to support it -- did such routes receive greater subsidies than merited? I don't know. Take the 3 flights of 18 passengers on a 737 into a small city that you raise as a straw man -- merge them to one flight on a 717 of 54 passengers and you have a passenger load that is not that bad. I take the approach that public transportation, whether by car, bus, train, or plane, is a public good and needs to be treated as such. That does not mean that every airline must fly into every Middlesex village and farm, but that some amount of regulation is needed. Doesn't this mean most people will have to pay more? Probably, but that's life. But think about this: Is it really in anyone's long term interest to have air fares less than costs? Of the major airlines, is any one really healthy? Did the disappearance of TWA really matter? I can't say exactly what I would want regulation to be, but I am no fan of the current system. I am certainly not saying that every pair of cities should have point-to-point service -- in the South Bend example I cited, you could fly to O'Hare, Detroit, Cleveland, or Fort Wayne and that was it (the trip to Cleveland had a stop in Fort Wayne.) There is a curious example at Cornell which older folks there could tell you about and I'm likely to get wrong. There is overcrowding at O'Hare, LaGuardia (sp?), and San Francisco. In addition, you get huge messes at other airports as well in bad weather which ripples through the system because of hub systems. Further, you have airlines screaming to fly into Washington National Airport where bad piloting a la Air Florida (to say nothing of terrorists) can easily take a jet into the Pentagon, the Lincoln Memorial, the Kennedy Center, Georgetown Library, etc. If it is not the government's job to say who flies what where and when, then what are we paying them for? <somewhat tongue in cheek> john On Thursday, December 11, 2003, at 11:21 AM, Douglas Schnell wrote: > I remain unclear on how deregulation resulted in a suspension of > antitrust > laws in the aviation sector. > > When the DOJ and FTC examine a merger--any merger--they look at the > impact > of the merger on competition in the market, not the impact on > consumers. To > the extent a merger makes a market more efficient, the merger should > be (and > almost always is) approved. In this country, we've gone through a > painful > experience with the "big is bad" school of thought. The capstone was > the > Supreme Court's 1960s decision to block a grocery store merger in > California > that would have increased market share of the combined company from 5% > to > 7.5%. It is an undeniable fact that consumers benefit from a company > that > can take advantage of economies of scale. > > As economic analysis has come to play an increasingly important role in > antitrust enforcement, competition authorities have (thankfully) given > up on > deciding on mergers based on gut feeling and shifted to making > decisions > based on sound economic evidence. At no time were any of the > post-deregulation aviation mergers exempted from antitrust review, > just as > none of the oil and bank mergers you mentioned were somehow given a > free > pass. (The banking sector is, incidentally, an especially poor > example of > an industry where consolidation might be a negative outcome. Even > today, > the US has many more banks, by several orders of magnitude, than any > other > industrialized country. There is persuasive evidence that this is > actually > a bad thing for economic stability, and the Fed has argued repeatedly > that > more consolidation is needed.) > > To say that we should return to the days of government subsidies to > support > inefficient airline operations (which you seem to be doing) is, in a > word, > ludicrous. Some communities cannot support 737 service and there is no > right, simply because your community has an airport, to point-to-point > jet > service. Airlines are not in the business of looking for ways to lose > money. If a route can support more capacity, that capacity will be > added > either by the existing carriers or by a new entrant. If there is one > fundamental fact about our economic system, it is that if you are > sitting on > a pile of money somebody is going to try to take it. It is not the > government's job to dictate which carriers can fly to which cities and > what > equipment they must use. Similarly, there is no intellectually honest > justification for a government subsidy that keeps a 737 flying 3 times > daily > to support an average of 18 passengers per trip. Nobody benefits from > that > outcome. > > -----Original Message----- > From: The Airline List [mailto:AIRLINE@xxxxxxxxxxxxxxxxx] On Behalf Of > kurtzke@xxxxxx > Sent: Monday, December 08, 2003 5:41 PM > To: AIRLINE@xxxxxxxxxxxxxxxxx > Subject: Re: Deregulation & Anti-trust Laws > > Douglas & List: > It shouldn't have. Perhaps I should have said "wryly" or "sadly" > rather than > "wisely." Alfred Kahn was the big promoter of deregulation in the > Carter > administration. In a retrospective PBS program on the effect of airline > deregulation, Kahn said that when he argued for deregulation, he never > imagined that the federal government would stop enforcing anti-trust > laws. > But look at the big mergers that followed. If you think that was a > peculiarly Republican (Reagan) fault, look at the big oil & bank > company > mergers that happened during the Clinton years. But that's leading > into > off-topic territory. > > Maybe the coming thing in airlines is many airlines (from Southwest, > the > recent startups, and the pieces of the coming bankrupt majors), more > point > to point service, and a return of regulation. > > john > > On Monday, December 8, 2003, at 02:17 PM, Douglas Schnell wrote: > >> Okay, I'll bite. How does deregulation result in the suspension of >> antitrust laws? >> >> -----Original Message----- >> From: The Airline List [mailto:AIRLINE@xxxxxxxxxxxxxxxxx] On Behalf Of >> kurtzke@xxxxxx >> Sent: Monday, December 08, 2003 2:40 PM >> To: AIRLINE@xxxxxxxxxxxxxxxxx >> Subject: Re: Can't wait until United dumps this sorry *ss airline >> >> BAHA and list, >> > [cut] > >> The result of deregulation (or as Alfred Kahn wisely noticed, the >> federal government halting enforcement of anti-trust laws) is that >> while you used to be able to fly United, North Central, etc. on a 737 >> or DC 9, you now get to fly a commuter airline on a commuter jet or a >> small turbo-prop. >> > [cut] > >> john >> >> Fan of enforcement of anti-trust laws > > John Kurtzke, C.S.C. > Department of Mathematics > University of Portland > Portland OR 97203 > > 503-943-7377 > John Kurtzke, C.S.C. Department of Mathematics University of Portland Portland OR 97203 503-943-7377