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All of the airlines would merge within a week under that regime, and then we'd all be paying monopoly rents to Amalgamated Airlines for the rest of our lives whenever we wanted to travel more than a hundred miles. And all of the other industries too. A 10% tax on deal consideration wouldn't even rate.
Couldn't competitors still come along?
Not if they can't get slots at the airports they need.
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Fuck it, just make them pay ME personally a % of that sweet sweet profit. Make it a good amount.
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The airline industry is the one industry that sort of has the go ahead to break antitrust law. The combination of high fixed costs, no moat, and marginal revenue maximizing pricing of $0 makes them go bankrupt too much. Their CEO’s already get to answer questions talking about anti competitive behavior with only a thin plausible deniability.
It's funny to think that airlines don't have a moat, since it's a ridiculously expensive business to run. But I suppose if you define moat that way then they don't.
Correct, their actual moat is airport slots and routes which are now meticulously tabulated when DOJ considers airline merger agreements after US Airways / American Arlines merger empirically resulted in higher fares.
It’s less of a moat in many cases than people think; the experience of euro budget airlines like Ryanair and EasyJet shows that consumers are happy to go to airports 100 miles out of town for fares 1/4 of the legacy airlines. Startup costs are extremely low with the leasing business the way it is. I’m skeptical that looser competition laws would dramatically worsen the situation for consumers.
Then why did USAir/AA raise fares?
I take your point on Euro airlines, but suspect that the Euro airport/airline system is different in some fundamental way.
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Great point. We should also add a market cap tax along the same lines. Perhaps 1% per trillion per year, adjusted along the same lines. (So 0.001% per billion, etc...)
This would prevent excessive consolidation.
The point is that the government, being so very bad it, should not intervene in the free market but should simply extract a simple and fair tax from excessive profits. The simpler the better.
There is no such thing.
You can sustain your profit margins through a fantastic product, a moat, whatever else. Or, they gradually erode to competition. Sure, software margins look eye-popping but the deeper financials bring the back to earth. Also, remember that, because of bad tax policy developer salaries were able to be categorized as R&D expenses for years instead of COGS, which artificially boosted margins.
Much more likely, your margins come back down due to competition. That's how the market works and it works well.
In the Government Contracting world, so much of pricing a project comes down to a "fair and reasonable" standard that is (a) loosely defined and (b) ultimately, subject to the whims of a mid level bureaucrat. How do they determine "fair and reasonable?" largely through vibes based "Gee! that seems like a lot!" reasoning. Bear in mind, too, that the GS pay scale tops out at maybe $160k (even in places like LA, NY, DC) and these gov't employees know that the VPs on the other side of the table from them are north of $400-$500k, and it does come down to pretty Kafka-esque jealousy sometimes.
The result?
Government Contracting, especially for weapons platforms and airplanes, is THE poster child for cost diseases, budget overruns, and takes-forever delivery. The government gets to feel smug for its penny-pinching at the unit margin level, meanwhile there's an ocean of cash they light on fire over 20+ years.
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This is staggeringly ignorant on many dimensions. To pick one at random, Mark Zuckerberg would happily manage his market cap down to $20MM and compensate his employees with cash if it meant he could rely on his sole shareholder vote to retain control and consolidate the entire tech industry into a behemoth that bestrides the world. Your proposal is a road to Soviet style serfdom, and not even a long road.
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