2005 Instituto Juan de Mariana
Instituto Juan de Mariana has received the Dorian & Antony Fisher Venture Grant
.
Instituto Juan de Mariana
Reducir tamaño de letra Aumentar tamaño de letra

Articles

Home - Articles - Bureaucrats and Ryanair

2007/07/24 - Gabriel Calzada - Expansión

Bureaucrats and Ryanair

Ryanair, the low-cost airline that now leads the world in number of passengers carried, tried to expand its operations by making an all cash offer for Aer Lingus. But apparently what was OK for Europe's old and stagnant national carriers is not acceptable for a company that satisfies consumers with private funds and low prices. That is how Brussels works!

For the first time, the Commission rejected an airline merger proposed by the industry's most competitive company. According to the monopoly charged with fighting against monopolies and protecting competition in Europe, Ryanair's bid for Aer Lingus would have caused serious harm to consumers. For the EU's Commissioner for Competition, Neelie Kroes, this paradoxical accusation is based on the belief that the merger would probably increase prices for more than 14 million passengers. Reducing the number of airlines, the EU contends, would lower quality and increase prices. Such logic seems taken from some terrible guide to competition policy. It ignores the dynamic competitive process and focuses on the number and size of the players involved. Following this pathetic line of argument, the poor consumer has no other option than to snap the neck of the hen that lays its golden eggs..

What is most galling is the Commission doesn't tend to challenge those companies that owe their significant market share to administrative favors. Instead, it blocks the growth of an airline that is gaining market share by lowering ticket prices more than any other competitor. I have no doubt they are attacking Ryanair precisely because, by being so competitive, it threatens the business models of a few aerospace dinosaurs. Governmental pressure in favor of those dinosaurs and against the consumer has also played its part. And if anyone doubts this, ask Ms. Kroes. She doesn't even blush in listing among her arguments for blocking the merger that the combined company would have even more leeway for lowering selected airfares.

European competition authorities have become the enemy of free competition and the consumer. The institutions for defending competition have smelled rotten for a long time. Up until now, it appeared this was only because they were guided by the fallacious or even absurd theories of "perfect competition." Using these institutions to stop a competitive company from growing while protecting inefficient political friends leaves an even worse stink than ever.


© 2005-2014. Instituto Juan de Mariana. All rights reserved.