Is Competition Policy to Blame for the Quality of Airlines in the US?
The safety and efficiency of US airlines are indeed top-notch, but when it comes to customer service, they often fall short of their international counterparts. A good deal of this can be attributed to the current competition policies that govern the US airline industry.
Enhanced Security and Its Impact
Post-9/11, the security measures implemented by US airlines have drastically changed the passenger experience. SECURITY measures, once a reasonable addition for safety, have spiraled out of control, affecting nearly every aspect of air travel. For example, a US airline captain openly stated that flight attendants were primarily security personnel, and their main role was pat downs rather than providing attentive passenger service. This marked a significant shift in focus from customer service to security, which has had a lasting impact on passenger experiences.
Comparative Flight Experiences
To provide a more concrete example, consider a flight with Delta. One year, you might fly from the US to France, and the next year, you might fly with Air France. The stark contrast in service quality is evident. Russian Aeroflot, for instance, proves to be far more customer-oriented and hospitable, especially when it comes to beverages. This difference in service quality is significant, and it's not just an isolated incident. Similar experiences are common enough to suggest that overall, US airlines are lagging behind their international counterparts.
Economic Theory and Its Application in Airline Industry
Economic theory suggests that in an oligopoly, market participants tend to behave like monopolists over time. The four major US airlines control 70% of the market. These carriers operate from fortress hubs with little to no competition. Even if a dominant airline wanted to provide exceptional service, shareholder pressure would make it difficult to achieve. Shareholders would argue that higher service costs mean lower profits, which would fall below industry benchmarks.
Competitive markets offer differentiated choices in terms of price and service, keeping profits in line. However, in oligopolistic or monopolistic markets, there is little incentive for price or service improvements once the market share battle is won. This can lead to stagnation in both pricing and service levels over time. The result is that monopolies and oligopolies tend to inflate prices and reduce service quality.
Consolidation and Its Consequences
Consolidation in industries, leading to pricing power and increased entry barriers through dominant scale, has proven detrimental to consumers in nearly every sector. Airlines are no exception. The concentration of market power allows certain airlines to set higher prices and offer lower service levels, as there is less competition to drive continuous improvement. Thus, the consolidation and resulting lack of competition have a significant negative impact on air travel quality in the US.
Regulation and Its Benefits
While the US airline industry is highly regulated, this regulation can have its positive aspects. Unlike many US carriers, numerous airlines from other countries, especially those in the Middle East with significant oil subsidies, are heavily protected and subsidized by their governments. This protection can provide an unfair advantage in the global market, leading to subpar service and higher prices for consumers.
US airlines face scrutiny and oversight, ensuring that they adhere to quality standards and competitive practices. This oversight is crucial in preventing the market from becoming too concentrated, which could otherwise lead to exploitative pricing and service practices.
In conclusion, while the safety and efficiency of US airlines are commendable, the quality of service leaves much to be desired. The oligopolistic nature of the US aviation industry, coupled with the lack of competition, is a significant factor in this disparity. Tighter regulation and a more competitive market environment could help improve the overall quality of US air travel.