The article starts with this premise, but fails to offer a shred of support for the idea.
> When the airlines were deregulated in 1978, economists led by Alfred Kahn, then chairman of the Civil Aeronautics Board, argued that airlines and airline tickets were really like any other free-market product. He called them “marginal costs with wings.” Nearly 40 years of deregulation have disproved that premise.
Airline deregulation has been a massive success. Inflation-adjusted ticket prices have fallen by 50% since 1978: https://www.theatlantic.com/business/archive/2013/02/how-air....
Moreover, airline deregulation had an unexpected side-effect. It led to the creation of modern parcel carriers like FedEx, who could not have existed within the old regulated system: https://www.mercatus.org/publication/unleashing-innovation-d....
> And one seat is pretty much like another — as economists say, there is little product differentiation — so in a competitive free-for-all, everyone goes broke.
That's kind of the whole point of competitive markets--to drive prices for undifferentiated goods toward the marginal cost of production.
> By 1988, 85 percent of airline markets had only two airlines competing, and they closely monitored each other’s fares, so that true price competition was rare.
Using markets without weighting by population makes no sense. There are tons of airports in the U.S., most in places that don't have very many people. In the markets with the most passengers, there are 4-5 of what the GAO terms "effective competitors": http://www.gao.gov/assets/670/664060.pdf.
> An industry that is not naturally competitive went from being a regulated cartel, to a brief period of ruinous competition, and then to an unregulated cartel — with predictable effects on the quality of service. This restored profitability, but at awful costs both to customer convenience and to economic efficiency as well.
The article argues that the airline industry is a cartel, and suggests that happened by 1988 (see above). But the airline industry lost $51 billion between 2000-2011, and recorded net losses every year before that since 1981.
> With the hub-and-spoke system used to defend airlines’ pricing power, there are fewer nonstops. Passengers waste time and often miss connections, while airlines waste fuel.
This is handwaving. If the hub-and-spoke system wasn't a net efficiency win, nothing would stop one of the numerous low-cost airlines from coming in and using a different system.
> But in an industry that is not naturally competitive, tweaking market incentives will not fix what’s broken. For starters, planes should not be permitted to fly so full. That leaves no room for contingencies.
Another hand-waving assertion.
> There should also be rules on how many passengers an airline can cram into a plane, and what extras it can charge for. And there should be limits on price gouging. It makes no sense to allow airlines to charge an astronomical fare just because a flight is nearly full, and a dirt-cheap fare for an advance booking.
More handwaving assertions. These things aren't "price gouging" in need of regulation any more than its "price gouging" for Apple to charge $100 more for a 32 to 64GB upgrade that costs it $10-15.
> Would rules like these destroy the airlines’ business model? Ask Amtrak, which hauls three times the passengers between New York and Washington as all airlines combined, and doesn’t punish you for canceling a ticket.
I used to ride the Northeast regional every workday for almost two years. Even on that segment, the only profitable part of Amtrak's entire system, Amtrak is using cars that were all built between 1973 and 1982 (which themselves were a slight retooling of a 1960s design). Despite Amtrak not paying for its own CapEx, its infrastructure is near collapse, with key infrastructure like the Baltimore & Potomac tunnel operating far past the point of obsolescence.