MPC Hill Blast: ICYMI: ‘Airline Cards Are Messing Up the Whole Industry’ — NY Times
This piece in the New York Times lays out some of the problem web of ties and monopolistic practices between the credit card and airline industries.
It makes clear that the few dominant airlines use credit card loyalty programs “as a weapon against carriers like Spirit” — blocking competition that could give customers better prices and service.
And it shows that credit cards “marry the biggest banks to the biggest airlines.”
At the height of the financial crisis bailout of the banking industry, for example, “JPMorgan Chase found time on the very day that the illiquid insurer American International Group was nationalized to sign a $600 million advance to United.” Did JPMorgan Chase know it was about to get $25 billion in government money when it advanced funds to United? Was it a backdoor government bailout of United? We may never know.
The piece describes how U.S. Bank withheld money from Spirit Airlines on its deal, which amounted to “steel nails in Spirit’s coffin.” Was that because of U.S. Bank’s ties to the dominant airlines? Was it helping those big airlines dominate the market even more? Again, we may never know.
The conclusion of the piece is that the interconnected web that is the “aviation banking system” is the “single biggest barrier to another national carrier emerging to challenge American, Delta and United with lower fares.”
The bottom line here is that monopolies and anticompetitive activity are always problems. Competition is good for American consumers and the economy.
We know we need competition in credit cards — and there is a good legislative solution that would give us real competition to help cure the problem.
It sure sounds like we need more competition in airlines too. As the author notes, “The least Washington can do is stop pretending the problem doesn’t exist.”
COMPETITION IS BETTER FOR EVERYONE
IT'S TIME TO PASS THE CREDIT CARD COMPETITION ACT