I'm skeptical of the claim that airlines are a declining cost industry with low
barriers to entry. Granted, a full plane has probably only slightly higher
costs than an empty one, but eventually you have to buy another plane or turn
away business. How many investors will put the money into starting a new
airline if they absolutely know it will go bankrupt in a couple of years? (Then
again, maybe this is like the "oil companies" that were routinely founded in
order to be immediately extorted--I mean, sold--to Rockefeller when he was
foolish enough to try buying up the entire industry.)
For the airline industry to be viable the profits in the good times have to be
greater than the losses in the lean times. This probably does occur, and would
be more likely to occur if American bankruptcy law did not allow unprofitable
airlines to stay in business for years before liquidating them, thus lowering
profit margins for all other airlines.
Most airports are government-owned and hardly profit-maximizing. If I'm not
mistaken, airport slots have traditionally been leased to airlines for
substantial periods of time (maybe even 99 years). I suspect that newer
airports are less likely to make this mistake because they see how much people
living in Atlanta get gouged by the 80% market share of Delta (that's just an
example). Then again, these decisions may have been mandated by the government
for all I know.
Also, I believe that the fees that airlines get charged by airports for takeoff
and landing are completely regulated by the government. These fees seem to have
the effect of subsidizing smaller airlines (even Southwest) at the expense of
the larger ones.
In short, there are a lot of government interventions that distort the
efficiency of the airline industry. There is no doubt that the airline industry
is a useful industry; no matter how annoying the airlines are these days, the 5
hour trip from East Coast to West Coast still beats the 5-day train ride.
James
