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Greg Abbott Is Sadly Wrong About The American/US Air Merger

Texas Attorney General Greg Abbott raised a few eyebrows last week when Texas joined the federal government’s lawsuit against the proposed American Airlines-US Airways merger.  Abbott hoped to explain his decision by writing an editorial in The Dallas Morning News that is excellently written, but sadly misguided in its conclusion.

The crux of Abbott’s argument is that allowing American and US Air to merge would kill competition and the free market.  He goes so far as to say the airline industry is turning into a “oligopolistic market,”where a few sellers offer goods to buyers.  This may sound scary, and it’s certainly populist rhetoric, but it’s far from the truth.

What Abbott forgets is how often the federal government has helped airlines stay afloat.  The Wall Street Journal pointed out in 2008 the government actually bailed out the airline industry following the September 11th terrorist attacks with $5-billion in cash, a $10-billion loan guarantee program, and other insurance and liabilities.  The Air Transportation Stabilization Board handed out loans worth over $1 billion to various airlines, with most of the loans going to US Air.  US Air owed the government so much, the ATSB essentiallyfinanced their merger with America West by redoing the loans so America West could take over US Airways.

The federal government also helps out the airlines by making air traffic controllers government employees (so airports and airlines don’t have to pay them) and hands out almost $4-billion in aid to airports, so they don’t have to charge customers or airlines.  There is also the Civil Reserve Air Fleet which gave out $2 billion in contracts in 2004, according to a paper written by USAF Lieutenant Colonel Rob Kyrouac to the Naval War College.

But the federal government doesn’t just help out airlines with cash; it also helps airlines by restricting access.  The Wright Amendment, named after former Speaker of the House Jim Wright, kept Southwest Airlines from sending direct flights out of Dallas-Love Field to states not directly connected to Texas.  The amendment was passed at the behest of the city of Fort Worth, DFW Airport and Braniff Air.  Corporatism, fascism and crony capitalism anyone?  The good news is the Wright Amendment will expire in 2014 and Southwest Airlines will be able to fly to anywhere out of Love Field.

Ever think about why British Airways only flies to international destinations from the US?  It’s because they can’t operate domestically in the US.  The federal government won’t allow them.  Opening foreign airlines to US skies would create more competition and encourage better products for air travelers.

Another place where Abbott is wrong has to do with access by smaller airports by the new American.  He believes these airports would be hurt by the merger.  However, several airports have already told The Fort Worth Star-Telegram, they’ll do all they can to support American and point out the fact American has already made cuts in regional service centers which weren’t working.  Plus, there are also airlines like United Express and Southwest Airlines which could always expand services if they desired.  It also doesn’t stop someone from creating a commuter airline which would only service Texas cities.

There’s a simple solution to all these problems: get the government out of the business of helping big business, or any business.  That’s the only way for there to be a truly free market.  The point of the merger is capitalism; free market capitalism.  US Air and American are doing what they can to survive in the current challenging air travel market.  By merging, they hope to create a better product for customers and make more money long-term.  That’s capitalism, and the type of capitalism a freedom-loving person like Abbott should support, rather than try to stop.

The big question is whether this will hurt Abbott in the polls.  Mike Hashimoto with The Dallas Morning News rightly points out this makes Abbott appear to be interested in interfering in the market where he sees fit.  This is strange for someone who summarized an Abbott Administration as “liberty.”

Abbott can defend his merger opposition all he wants, but he’s wrong.  If anything, this is a reminder to every voter out there of one simple truth: not every politician is perfect.  There’s still a lot to like about Greg Abbott, but this isn’t part of it.  Hopefully he’ll realize the error of his ways and change his mind.

After all…he is a politician. And a very smart one at that.