Let Market Forces Regulate – Airline Competition

Here’s an email I just sent one of my classes:

Hello, History of Thought Students,

This came into my mailbox in the last half hour. It illustrates the “activist anti-trust policy” that the Ordoliberals favored. From my classical liberal perspective it is another example of foolish restriction of competition. Competition is what enterprises do to win business; it is not having some number of enterprises in the industry. US Airways and AMR (American) believe they can compete better by merging. Impertinent government officials stand in their way, even though Southwest, United, Continental, AirTran, Delta, and others are out there, and anyone is free to start up a new airline.

This kind of government interference in business enterprise is, again from my perspective, a main reason why our economy is not generating goods, services, jobs, and wealth faster.

Best to all,

HB

THE WALL STREET JOURNAL   News Alert

U.S. Wants Broad Divestitures From US Airways, AMR

U.S. antitrust authorities want to see a broad package of divestitures from AMR and US Airways Group as part of any deal to settle the government’s challenge to their merger plan. Talks are under way between the two sides three weeks before a trial of the antitrust challenge is set to open in Washington.

The Justice Department’s antitrust suit, which sought to block the merger of AMR’s American Airlines and US Airways, argued that the deal would harm consumers by reducing air service and increasing fares.

The opening of settlement talks suggests that the government isn’t taking an absolute stand against the deal and that a trial isn’t a certainty.

See More Coverage »

UPDATE, November 7: My student Elan Becker reminds me of another government intervention in air travel that reduces competition: foreign airlines are prohibited from serving the American market.

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