|Airlines of Prey Protected by Government Inaction|
|Topic||Market Failure, Regulation, and Public Choice|
|Key Words||Low-cost competitors, prices, markets, fares, service|
Outgoing Secretary of Transportation Rodney Slater said that the Clinton Administration would not introduce guidelines to prevent big airlines from thwarting low-cost competitors by temporarily cutting prices and offering more flights until the competitor was forced out of the market, whereupon the major airline would raise fares and reduce service once more. Slater said that general guidelines would be inappropriate and that a case-by-case approach would be better.
This is in stark contrast to the 1998 Department of Transportation view which was that guidelines were needed. Since then, however, the major airlines have lobbied intensely against measures. Slater responds that regulations could stifle true competition: it could be that a smaller airline simply could not perform. The new administration will have three studies of past unfair practices to decide which way to go.
(Updated February 1, 2001)
|Source||David Field, "No guidelines to limit major airlines' response to low-fare rivals," USA Today, January 17, 2001.|
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