Spitzer’s Bankruptcy
This article is from the archive of The New York Sun before the launch of its new website in 2022. The Sun has neither altered nor updated such articles but will seek to correct any errors, mis-categorizations or other problems introduced during transfer.
US Airways passengers worried about whether their frequent flyer miles and advanced ticket purchases are safe following yesterday’s Chapter 11 bankruptcy filing by the airline can blame the attorney general of New York, 2006 gubernatorial candidate Eliot Spitzer, for their troubles. Though Mr. Spitzer talks a centrist, New Democrat talk, he’s been the bane of business. And in the end, that hurts consumers. In a July 27, 2001, press release, Mr. Spitzer announced that New York would join a lawsuit to stop a United-US Airways merger, which was duly stopped. Had the merger gone through, the airline would still be solvent, and your miles would be safe. (The company claims your miles are safe now, but in a contest between unsecured creditors, we’d bet on Boeing over Jane and Joe Frequent Flyer).
That July 2001 press release from Mr. Spitzer said: “Spitzer has long opposed the merger, saying that as proposed, it would result in less competition and higher airfares for upstate businesses and consumers. Spitzer’s Antitrust Bureau has led a year-long multi-state investigation into the matter. ‘Hopefully, this action by the Justice Department and the states will be the final nail in the coffin to a proposal that I believe would have been very harmful to the fragile upstate economy,’ said Spitzer. ‘We need more competition, not less in the airline industry. We’ve seen the significant impact that airlines like JetBlue and Southwest have had on upstate airline prices, and we can’t afford to take a step back now.'”
That misunderstands airline economics. The success of JetBlue and Southwest proves precisely that the airline industry has lower barriers to entry than many imagine. The smaller, more nimble new entrants, with lower cost structures than the established giants, have flourished without much help from Mr. Spitzer. Mr. Spitzer’s intervention that was supposed to help the “fragile upstate economy” has led to the bankruptcy of one of the main airlines that serves that economy. The airline also serves New York City residents who take advantage of the frequent flights to Cape Cod and the islands, Boston and Washington. Note to Mr. Spitzer: A bankrupt airline isn’t much competition for anyone.
