Tuesday, May 30, 2006

Look to the Circumstances not just the Problem

High airfares and poor service are common traits of a public monopoly not a private monopoly. There is a difference between the two. A private monopoly (e.g. Microsoft) becomes the dominant firm by either providing the lowest price possible, the best service possible or both. A public monopoly is a result of government regulations and laws that prohibit competition in one fashion or another leaving one firm in the marketplace.

What we have with Hawaiian airlines is a public monopoly made possible by the Jones Act and other US cabotage laws. These protectionist laws prohibit foreign carriers from servicing the Honolulu Pago Pago route because spoiled American airline companies do not want the extra competition anywhere within the US.

If the governor’s claim that the Pago route is a “cash cow” is correct, where are all the investors lining up to get in on this money-making venture? Why have we only seen competitors leave our market (even with subsidies) instead of making the kind of money HAL is now rolling in?

I guess a low seat occupancy does matter. A lot. Yet there are investors out there who think they can do what Hawaiian can’t. But they’re foreigners. Those scheming Asian folks who conspire to take over the world by lowering prices or providing better services to Samoans. How dare they!?!

It goes to show that imports are a good thing because they save consumers money for other things. So we need to import more flights into our territory in an effort to increase supply to lower prices. Removing the obstacles that hinder investors from competing with Hawaiian for any profits made on the Pago route is where the ASG should focus its time and energy.

In the meantime, Governor Togiola’s class action lawsuit would be harmful and unfair. If HAL leaves AS, will Togiola’s public-private charter (which he, a family member or a friend may likely be a board member) come in time to save the day? Will the mainland American taxpayer dole out money to cover the charter’s costs if it can not replicate HAL’s performance record? If this class action lawsuit was fair, why can’t taxpayers sue the governor for the exorbitant price we pay to run a relatively small local government and for its inability to account for all of our hard-earned money? If government were held to same accounting standards as HAL and the powers of its stockholders, many officials would have been sentenced to life in prison or ousted out of office a long time ago.


At 12:49 AM , Blogger Stuart K. Hayashi said...

What? Hawaiian Airlines has a monopoly on this lucrative route because a federal U.S. regulation forbids any other firm from competing against the entrenched monopolist?

That sounds like the plot of what you listed as one of your favorite movies on your Blogspot account -- The Aviator. In it, the diabolical Pan American Airways founder Juan Trippe persuades Sen. Ralph Owen Brewster (R-ME) to introduce a bill forbidding any airline to compete against PanAm on certain transatlantic routes, thereby shutting Howard Hughes's Trans World Airlines (TWA) out of that market.

Perhaps people -- and not just in American Samoa, but everywhere in this country -- would have a clearer understanding of where monopolies come from if they watched this movie for the story instead of for the pretty movie stars in it?


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