CLARKONOMICS: Airfare from the U.S. to Europe is poised to get a whole lot cheaper if a European airline buyout is approved.
RyanAir, the world’s largest discount airline, wants to buy ailing Irish carrier Aer Lingus. If they can fight back all the objections, it will unleash competition like fares of $200 roundtrip from the U.S. to Europe. And that might be on a high day!
RyanAir does things like $19 one-way on specials all around Europe. They offer fares that have changed the face of air travel there and they want to do the same too from the U.S. Look at RyanAir.com and you’ll get a sense of what they did to change the price of flying in Europe.
Now the full fare airlines are trying to convince regulators that having the low cost airline operating across the Atlantic will stifle competition. Seriously?!
Let me just say this: RyanAir is not everybody’s cup of tea. Let’s just say you’re working for your savings when you fly them, as I have over in Europe. But the free market should decide if people want to fly them. Not the full fare airlines.
If you know the history of air travel, you know that travel from the U.S. to Europe was booming, growing year after year. Then we and Europe entered into cartel arrangements that created three price-fixing cartels to control trans-Atlantic travel. (We knew how cartels played out with OPEC, but the airlines were so powerful that they got it through on both sides of the pond.)
The result is that airfares have effectively doubled — not related to the price of oil.
Shock of shocks, people have decided not to fly to Europe in the numbers they once have. As a result, one full fare airline after another has been reducing routes. It’s as if all these cartels thought they could suspend simple normal economics.
They didn’t realize how much of air travel is elastic. When the price is right, people go. When the price is too high, they say home.