[Gocamino] RyanAir, Cartels and a free market

[Grant Spangler]

In a true free market economy, goods and services and prices would just sort themselves out. Enter the real world of money and politics; all that feel-good Econ 101 stuff goes right out the window. For North Americans, a large part of the cost of the Camino is the airfare across the pond. We face three officially-sanctioned cartels of airlines: Star Alliance, OneWorld and SkyTeam. The DoT has essentially suspended antitrust and even encourages them to work together .. rather like giving the foxes charge of the henhouse. Nationally-flagged carriers seem to have a knack for losing money, but not that upstart RyanAir. Love them or hate them, they offer some exceptionally cheap fares if you book a few weeks in advance. RyanAir is a player in a game that could upset the cartels’ lock on that transatlantic pricing. If their bid to take over Aer Lingus is allowed, there could be fare wars for the North Atlantic routes. ‘Allowed’ .. ah there’s the rub. The agencies which would allow the acquisition would be the same agencies who promote the airline cartels’ price fixing. And why would that surprise you? Article follows.   


RyanAir to radically lower price of getting from U.S. to Europe?

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 www.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.

Source: http://www.clarkhoward.com/news/clarkhoward/travel/ryanair-radically-lower-price-getting-us-europe/nPbFm/

A bit of back story from The Economist: http://www.economist.com/node/21538149

Buen Camino,

Grant

http://www.ElCaminoSantiago.com
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