CABOTAGE! After Delta and United’s entry into politics — and their supporters’ boast that unhappy customers don’t have much in the way of alternatives — it’s time to revisit this idea from Matt Yeglesias! (No, really). How to Revive Airline Competition: Let foreign-owned airlines fly in the United States.
And while it has a funny name—“cabotage”—the basic concept is simple: Let foreign airlines fly domestic routes in the United States.
This is one of those ideas that’s so commonsensical, people tend not to realize it isn’t permitted. But if you’re wondering why it is that, say, Emirates will fly you from Los Angeles to Dubai or from Dubai to New York but not from California to the East Coast, that’s the reason. It’s illegal.
On a practical level, this creates obvious problems. Many international travelers are bound for cities that aren’t large enough to host substantial transcontinental operations. Thus, the invention of codesharing. A traveler bound from Copenhagen to Tulsa would fly on SAS to O’Hare, Newark, or Dulles and then switch to a United flight to Oklahoma with booking done on a single website and baggage transferring smoothly thanks to a partnership between the airlines.
Over the years the industry has evolved a mode of deep collaboration among airlines from different countries. Many major global airlines have joined the Star Alliance, the Oneworld Alliance, or the SkyTeam. The different members of an alliance remain separate companies with separate ownership, separate labor unions, and separate flight operations. But across an alliance, you can generally accrue frequent flier miles, access airplane lounges, transfer elite status, and count on smooth handling of multi-airline bookings.
But while alliances reduce practical problems associated with anti-cabotage rules, they do nothing for competition. In fact, by encouraging collaboration on major international routes, they reduce it.
To bolster competition, you need to let foreign airlines actually operate domestic routes.
Endorsed!
Related: More competition is answer to shoddy airline treatment. “If American consumers wish to enjoy improved service quality in air travel, they should demand that Congress repeal 90 years of anti-competitive federal law. Less regulation of air travel, not more, is the solution.”