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The federal government wants to sacrifice Doug Parker’s plan to create the world’s largest airline on the altar of lower airfares. But it’s not willing to sacrifice its own policies to that same goal. Even as its Department of Justice tries to stop the US Airways-American Airlines merger with an antitrust lawsuit , the federal government continues to restrict competition in air travel.
Under federal law, if a company wants to run a domestic airline, it has to be at least three-quarters U.S. owned . (Virgin America is a distinct corporation only 25 percent owned by Richard Branson's Virgin Group.) So foreign companies can’t go into the domestic airline business. If reducing the number of competing airlines harms consumers—as the antitrust case to block the merger argues —surely this policy does too. The merger would decrease by one the number of airlines competing in the domestic market; it’s impossible to tell how many would-be competitors the ownership policy excludes.
The rule that domestic airlines must have mostly American owners is backed up by a “cabotage” rule that limits what foreign airlines can do in this country. Foreign airlines may take passengers from U.S. airports to foreign ones or from foreign airports to U.S. ones, but they may not normally take anyone from one U.S. airport to another unless it’s part of a trip that passenger is making with that airline to or from another country. So, for example, British Airways may take you from Los Angeles to New York and thence to London, but it may not take you from Los Angeles to New York and leave you there. And if it runs a return flight from London to New York and on to LA, and some passengers get off in New York, it may not fill those seats with passengers who are only going from one coast to the other. This too drives up airfares.
As I’ve pointed out , the government has many goals, and consumer welfare is just one of them. It’s important enough to override a businessman’s freedom to produce and trade . But it’s not important enough, in the government's view, to override the goal of having domestic air travel provided by companies with American owners. According to our government, American ownership is more important than consumer welfare, which in turn is more important than the freedom of production and trade.
And if you don’t share those priorities -- if you value your freedom, but don't care whether airlines are owned by Americans—too bad. The fundamental premise of antitrust is that government is entitled to shape the whole economy by whatever priorities it chooses.
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