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Friday, September 20, 2013

IATA: U.S. Needs to Loosen Regulatory Grip on Airline Industry

Woodrow Bellamy III

The International Air Transportation Association (IATA) is urging governments across the globe to foster a more economically vibrant airline industry, with a focus on the United States, where about 20 percent of the average airline ticket goes to taxes and fees. 
During a speech at the Wings Club in New York on Thursday, IATA' s director general Tony Tyler criticized regulators in the U.S. for holding its commercial aviation industry to a "different business standard than they impose on any other form of transportation."
"It is particularly distressing to find that the United States, where this industry was born and which led the world in liberalizing domestic and international air transport, seems to be moving forward into the past," said Tyler. 
The IATA chief cited the Department of Justice (DOJ) decision to file a lawsuit in an effort to prevent the merger of American Airlines and US Airways as an example of overregulation of the industry by the federal government. Tyler believes airlines are facing more barriers to consolidation than other businesses, despite the fact that past consolidation--such as the 2010 merger between United and Continental--has led to more profitable business models. 
DOJ has claimed that the merger between American and US Airways would lead to higher fares and less options for air travelers because of the reduced competition between the two carriers. 
In contrast, Tyler argues that it is the increased regulation of the airline industry that raises the cost of air travel. 
In his 2014 budget request, President Obama has proposed tax increases on air travel.  According to industry trade association Airlines for America, that would raise taxes on a typical $300 domestic ticket from $60 to $75. 
"Regulators are micro-managing our businesses, telling us how we may advertise our services, how long we must hold a reservation that has not been paid for and how we are to manage operational disruptions regardless of the cause. These regulations impose a huge penalty on the economy and ultimately raise the cost of air travel for all consumers," said Tyler.


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