Washington Monthly - Hey, Pete Buttigieg, Use Your Power to Get Us Better Airline Service
Reporter Luke Goldstein writes on the discrepancies in airline performance and the Department of Transportation plays a role in improvements.
Anticipating disruptions to airline travel over the Labor Day weekend, Secretary of Transportation Pete Buttigieg sent a letter to the 10 largest airlines’ chief executives censuring their recent behavior as “unacceptable.” “These aren’t just numbers. These are missed birthday parties, graduations, time with loved ones, and important meetings,” he wrote in August. Buttigieg threatened to post an online chart assessing the airlines’ performance if things got worse.
The secretary should and could do much more. Nightmarish airline travel conditions have become a fixture this summer. It has gotten so bad that 38 state attorneys general, from both red states and blue states, sent a joint letter on Wednesday to Senate and House leadership explicitly calling out Buttigieg’s Transportation Department for failing “to respond and provide appropriate recourse” for frustrated airline flyers. Airlines delayed more than a million flights and canceled almost 129,000 from January to July, more than in 2021 and surpassing pre-pandemic levels by 11 percent. In many cases, the airlines know beforehand that they’ll have to cancel flights at the last minute because of staffing shortages or scheduling complications. They sell tickets anyway, betting that many customers won’t cash in the vouchers they receive. According to a Wall Street Journal investigation, the airlines made $10 billion in 2021 from unredeemed vouchers.
Yet Buttigieg’s idea of getting tough on airlines seems to mean pummeling by PowerPoint. Instead, the secretary needs to use his powers. Section 411 of the Federal Aviation Act, for example, grants the secretary of transportation the authority to “investigate and decide whether an air carrier, foreign air carrier or ticket agent has been or is engaged in an unfair or deceptive practice or an unfair method of competition in air transportation or the sale of air transportation.”
In 2010, Transportation Secretary Ray LaHood used this authority to issue severe penalties for airlines that left passengers waiting on tarmacs for hours before canceling flights, a widespread problem at the time. Many members of Buttigieg’s party, including Senators Elizabeth Warren and Bernie Sanders, are urging him to use that power again. New York Attorney General Letitia James has even told him exactly how to do it. “Airlines knowingly advertising and booking flights they do not have adequate staff to operate are flying in the face of the law,” James said at a press conference.
Buttigieg shouldn’t stop there. Most of what’s gone wrong with flying is rooted in monopoly, and, as it happens, federal law also gives the Transportation Department substantial authority over airline mergers.
After a wave of large mergers from 2010 to 2013, just four airlines now control most of the market. The Big Four can tacitly collude to keep prices high and lower seat supply, which helps explain why fare hikes this summer have far surpassed inflation. Amplifying the effects of monopoly, a small group of giant institutional investors—notably BlackRock—all hold major stakes in each of the four major airlines. A 2018 paper by the economists José Azar, Martin Schmalz, and Isabel Tecu showed that this concentrated ownership structure reduces the incentive to compete and increases consumer costs.
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