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There's Nothing Fair About the Air Fares in California's Busy North-South Corridor

July 15, 1990

Misleading apologies for airline-industry practices that were articulated by two Brookings Institution fellows in the June 17 Viewpoints ("Californians Getting a Fair Deal on Air Travel") merit my response.

* The authors suggest that airline "profits amount to only about 4 cents out of every fare dollar." But where are the profits coming from? Not the Los Angeles-to-New York market, where fares are about 3.3 cents per seat-mile. The profits are coming from the Los Angeles-to-San Francisco market, where fares have been running 65 cents per mile. The fact is, California fares amount to a de facto subsidy for out-of-state fares, and that's unfair. The Public Utilities Commission report revealed that air fares in California, adjusted for inflation, rose 40% from 1979 to 1988.

The experience of Southwest Airlines, one of the few low-cost airlines today, exposes the fare-gouging practices of the rest of the industry. Before Southwest entered the Burbank-to-Oakland market, fares were averaging $186. After their entry, the unrestricted fare dropped to $59.

* Contrary to what the article suggests, air fares have very little to do with what it costs to provide service. Even the airline industry itself, at a Senate committee hearing I sponsored on April 2 at Los Angeles International Airport, admitted that air fares are based on what "the market will bear."

* Mergers have had a negative impact. Over the last few years, the Department of Transportation approved every airline merger proposal. As a result, the eight biggest carriers control 92% of the domestic market. California was especially hard-hit, losing not only its home-based airlines such as PSA and AirCal, but also its principal low-fare competitors.

After these airlines were taken over, fares went up and ridership went down in the north-south corridor--the busiest in the nation--to 8 million in 1989 from 12.5 million in 1987. Clearly, fares are having an adverse effect on the air traveler.

* The authors boast that the number of viable competitors in the Los Angeles-Sacramento market is up to 3.5 from 2.7. But how can we proclaim the arrival of competition when all 3.5 charge a $456 unrestricted fare?

If the airline industry will not listen to the public, perhaps legislation to directly improve competition stands a better chance of getting their attention. The direction of air fares in California in the months ahead is the message consumers are awaiting from the airlines.


D-Los Angeles

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