Q. A lot of people feel that the big carriers have got to be reined in, that we need more public control over air service in this country.
A. Senators and Congressmen who want to tell the airlines what to do are not sticking up for consumers. It's consumers who pay when we are forced to operate in inefficient ways.
Suppose they said, "We don't want you guys to lose our bags anymore. And every time you lose a bag we're going to fine you a million dollars." Well, I can fix that tomorrow morning! We will never lose another bag. But it will be very inconvenient to travel. Today you come into Dallas-Fort Worth from all these different places, and in 45 minutes you make your connection and you go out. But in the world of the future, where bags are never lost, I'm going to keep you there for three hours, because I'm going to make sure I get every bag.
Q. In 1978 Washington began to deregulate the airlines with the goals of increasing competition and improving service. Yet critics say deregulation has backfired, that it has enriched the biggest airlines but has hurt passengers by producing less competition, higher fares and fewer choices.
A. It would be hard to be more wrong. Studies by the Brookings Institution show that during the first 10 years of deregulation, passengers saved $1 billion.
Q. Well, of course fares were lower during the '80s. But that was during the shake-out, during the bloodiest fare wars in airline history. That wasn't a normal period.
A. What is? The problem isn't deregulation; it was regulation. For 40 years, the government regulated the airlines, and did a perfectly awful job of it.
Q. That's not how consumers remember it.
A. That's because regulation distorted reality. When the government was running things, regulators designed any kind of routes and service they wanted, with no regard whatsoever for matching consumer desires or providing something that people were willing to pay for.
Q. Still, one result is that air travel is less convenient. Left to their own devices, airlines have eliminated many direct flights and have forced passengers into the Cuisinart machine of a system that forces people to fly to hubs like Chicago or Atlanta in order to catch planes to their real destination.
A. Let me ask you this: Do you have a grocery store right next to your house? Well, why not? Wouldn't it be more convenient for you? Of course it would! If you could regulate grocery stores, you might be able to have a rule that there would be a grocery store on every block. But how many grocery stores can one neighborhood support? That's what airline regulation did. The government required us to put in all kinds of service that consumers didn't need. And we've been trying to sort it out ever since. The hub-and-spoke system helps to hold down prices.
Q. Then why are average fares higher at the hubs?