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Author Topic: Evidence Supports Supply-side cause for high fares at MSP  (Read 2314 times)
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« on: July 11, 2014, 03:34:35 PM »
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Reuters, in a widely syndicated story:

"In particular, airlines in North America have benefited from an extended run of 'capacity restraint,' generally meaning that they've been able to charge higher fares because the supply of seats has not been increasing faster than demand....

"In another time and in most other industries, this 'capacity restraint' would be tagged as a collusive antitrust action by the airlines."

The story was about International Airline profit forecasts diving due to 'overcapacity'.  Capital invested in more, more frequent, or more desirable products is a product of competition. The air travel market world-wide is dividing into two pieces (First Class and Economy). The airlines pay more for "room and service"
in flight: Without meaningful competition, airlines can  support First Class capacity without reducing Economy revenue by reducing the supply of cheap seats.
At MSP, the Airports Commission and Metro and State government historically supported a home-town near monopoly airline because its presence and profits were economically beneficial overall. As this is no longer the case, policy needs to favor competition.

The present airport services and facilities include over-sized terminals and a congested airfield at peak hours.  Captial and operating costs are high, which are funded by airline landing fees and leases, but paid in fact through local airfares. Duplicate international arrival facilities and other costs related to surge and layout issues at MSP, are tax-payer funded except for a part of passengerfacility charges per boarding passenger.
« Last Edit: July 11, 2014, 03:43:22 PM by Forum Manager » Logged
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