Airlines have been a hot topic here in DC of late as there have been hearings on the United-Continental merger going on. My ears perked up when Rep. Oberstar, chair of the House Transportation and Infrastructure Committee tossed out the idea of re-regulation. He used the fact that airlines got $2.7 billion worth of revenue from bag fees as an example that we, the consumers, aren’t seeing that many benefits of a deregulated industry anymore.
To use some quick back-of-the envelope math here, Oberstar’s arguments don’t seem to make a lot of sense to me. Sure, $2.7 billion in ancillary revenue sounds like a lot. But the DOT reported that about 703 million passengers flew in 2009. So that comes out to about $3.84 per passenger, not exactly a massive shift in the industry here.
And to take it a step further – the DOT also reported a $7.40 decrease in average fares in 2009. So despite all that extra ancillary revenue it seems that travelers still ended up coming out ahead last year.
Meanwhile, the Air Transport Association has a very handy chart that really shows the effects of deregulation on prices. Since 1978, the CPI has increased 229% while domestic air fares have only risen 42%.
I realize my analysis is very quick here – but from where I sit this does not seem like the strongest argument for re-regulation.
How on earth is Oberstar even elected?What a moron!Minnesota…get rid of him.