The United Debacle Shows Airlines Have Given Up On The Free Market

The airline industry is hurtling toward monopoly.

There was something missing in United Airlines’ response when police officers dragged a passenger from one of its planes.

Normally, when a company is the target of customers’ fury, it rolls out an explanation of how and why the awful things it does are simply capitalism’s natural course ― so normal, in other words, that to do things any other way would be wrong.

Yet amid United’s responsibility-skirting euphemisms (“I apologize for having to re-accommodate these customers,” is a newly minted addition to the PR-speak hall of infamy), the airline never turned to that last refuge of corporate scoundrels ― the free market ― to excuse its own police-assisted brutality.  

This omission is all the more odd because there seems to be an easy free market solution within grasp: Just pay people enough money to get off the plane and take the next flight. Indeed, this is what airlines do all the time to get themselves out of a bind when the self-imposed (and profitable) practice of overbooking backfires.

While United did offer to pay, it reportedly stopped at $1000 before calling the cops. All the airline had to do, says the ghost of Milton Friedman, is offer a market clearing price!

But that assumes the airline industry broadly represents free-market principles. It doesn’t. It’s hurtling toward monopoly with regulatory blessing, foisting higher prices, fewer flights and crappier service on choice-bereft customers.

In a competitive market, the falling fuel prices of the last few years should have led to cheaper tickets. But that hasn’t happened. Instead, as the number of big airlines has been cut in from nine to four, customers haven’t seen any benefit from cheap oil, and ticket prices have risen. 

Airlines historically haven’t made much, if any, profit. Since 2000, every major airline except Southwest has declared bankruptcy. US Airways, which is merging with American, has done so twice. As the Financial Times’ Matt Klein notes, the last few years of profitability are not normal for an industry that has collectively lost billions of dollars over the last 50 years. Airlines’ current profits are a historical aberration that stems from using a lack of competition to exploit low oil prices. Rank-and-file employees are getting squeezed, too: Monopoly power hurts workers along with customers. Everyone involved is miserable and bound together by the threat of violence.

Rather than functioning as a tool to advance United Airlines’ “sadistic commitment to cost control,” as Klein notes, the government should actually enforce antitrust laws. Instead, after rejecting American Airlines’ proposed merger with US Airways, it approved the deal just three months later, after intense lobbying and revolving-door hiring.

The first step toward making things better is one the airline industry has already taken: Dispense with the corporate theology of idolized, naturally free markets.

This article has been updated to include additional information about airline profitability since deregulation in the 1970s.