What's the Big Idea?

For cheap fares, go European

By Kate Julian
Sunday, June 27, 2010

Anyone who has tried to book a summer airplane trip recently has probably had a bit of a shock. Gone are the days of flying cross-country for $400 or less -- now you're talking $500 or even $600. Bing Travel reports that domestic fares are up an average of 22 percent over last summer.

But according to a new American Enterprise Institute report by Mark Milke, a Canadian researcher, this state of affairs isn't entirely inevitable. His research finds inspiration in a place that AEI, with its free-market leanings, rarely regards wistfully: Europe.

"Every jurisdiction can have an ideological bias," Milke says, "and Europe, you can say, is sometimes anti-market, and anti-competition." But when it comes to air travel, he points out, the European Union has taken deregulation much further than the United States.

Since 1997, the European Union has allowed European airlines to pick up and drop off passengers anywhere within the union. Meanwhile, back in the United States, only American airlines can fly domestic routes. For example, Air France can fly you from Los Angeles or New York to France, but it cannot take you from Los Angeles to New York.

The result of Europe's move, Milke says, has been more routes, more competitors and lower fares. According to E.U. figures, the number of European routes with more than two competitors increased more than 300 percent between 1992 and 2008, in part because deregulation allowed low-cost carriers such as EasyJet and Ryanair to prosper.

Milke added up the price of five short-hop regional flights (Los Angeles-San Francisco, New York-Boston, Chicago-Detroit, Denver-Las Vegas and Miami-Orlando), covering about 3,200 miles in all, and found that they would run a combined $723. But a comparable 3,338-mile itinerary consisting of five in-country flights in Europe (London-Edinburgh, Paris-Nice, Milan-Rome, Dusseldorf-Berlin, Barcelona-Madrid) ran only about $380, including much higher taxes.

Why did Europe take such a free-market route? Well, Milke speculates, "if the point of the European project is to drop barriers and make people travel more freely and feel more European and get to know each other, it kind of makes sense."

But is there any chance of bringing EasyJet here? Milke sees room for hope in -- once again -- unlikely quarters: a "protectionist-minded" president and Congress.

"Back in the 1970s, it was a left-leaning president from the Democratic Party who first began to deregulate the airline industry," he writes. "There is no reason why, over two decades later, another left-leaning president, Barack Obama, cannot finish the work Jimmy Carter began."


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