Less than three months ago, NTU warned that taxpayers were at risk of rising long-term liabilities from schemes that would tighten the federal government’s grip on commercial air travel. Proposals in Speaker Pelosi’s COVID-19 relief package to micromanage labor, environmental, and business decisions of airlines thankfully failed to clear the House, but the CARES Act subsequently signed into law raised the prospect of Amtrak-style federal ownership stakes in airlines.
But now, more subtle means of introducing federal controls on air carriers – under the guise of “helping consumers” – could ultimately imperil the recovery of affordable travel. That could also lead to the vicious circle of greater pressure for government price controls and even worse anti-taxpayer measures.
The latest sources of such concerns have been louder calls for the Department of Transportation (DOT) and Congress to impose a fresh set of regulations on airlines. One is that airlines should refund any passenger who cancels flights because of Coronavirus-related travel plans, even those with nonrefundable tickets. The DOT has already reaffirmed that airlines must refund ticketed passengers when a flight is cancelled but has not required carriers to do so when the passenger cancels travel plans (though Secretary Chao has encouraged more lenient policies toward such refunds).
Much of the renewed uproar is because the federal government gave billions of dollars in grants for payroll to help the airlines bridge their unprecedented drop in passengers. True, nearly every public gathering has been canceled but the airlines were still providing service – indeed, the CARES Act required them to maintain service and petition the DOT if they wanted to scale back service to cities.
It may be politically convenient to put airlines on the hook and demand they reverse established refund policies, but in the end, public officials must face facts: even passenger cancellations of non-refundable trips are largely the result of government decisions to ban international air travel to and from many destinations, make domestic travel unattractive for most Americans, effectively shut down travel-friendly events such as conventions, and close hospitality businesses. These decisions and their financial consequences may have been necessary, but they originated from the public, not the private, sector.
Prior to the COVID-19 crisis, Americans already faced a number of challenges in federal policy toward aviation, including a failed air traffic control system, rising pressure to boost taxes and fees, and reversals in the highly successful Airline Deregulation Act. Adding to these challenges with even more government meddling in the air transportation sector will not bode well for taxpayers.
The DOT and Congress should tread carefully, whether they try to do so through the front door (taxes and takeovers) or the back door (regulations and restrictions). Using the bailout as a reason to upend airline business models will undoubtedly lead to a plethora of unintended consequences. Higher prices might be around the corner and will only be exacerbated by uncertainty.