Allowing foreign airlines to fly U.S. domestic routes might lower fares

See Open the Skies! by Alex Tabarrok.

"Here’s a list of the world’s top ten airlines:

    Qatar Airways
    Singapore Airlines
    Emirates
    ANA (All Nippon Airways)
    Qantas Airways
    Japan Airlines
    Turkish Airlines
    Air France
    Korean Air
    Swiss International Air Lines 

The airlines in this list have at least two things in common: None of world’s best airlines are US owned and none of them are allowed to operate domestically in the United States. The two common elements are related because so-called “cabotage laws” prohibit foreign airlines from serving domestic travelers.

Imagine what international travel would be like if you could only fly on a US owned airline? Ok it’s not that hard to imagine. Restricting international flights to domestic airlines would make international travel much more expensive and more inconvenient. The US State Department rightly lauds the Open Skies Agreements that have brought competition to international flights:

Since 1992 the United States has pursued an “Open Skies” policy designed to eliminate government intervention in airline decision-making about routes, capacity, and pricing in international markets…Open Skies agreements expand cooperative marketing opportunities between airlines, liberalize charter regulations, improve flexibility for airline operations, and commit both governments to high standards of safety and security.  They are pro-consumer, pro-competition, and pro-growth, and facilitate countless new cultural links worldwide.

True! But US domestic flights fly on Closed Skies. Europe has opened up competition to all European airlines. Indeed, Europe is also substantially open to US carriers, but the US is closed to foreign carriers for domestic flights. Cabotage laws are, in effect, a Jones Act for the airlines.

In a good review, Scott Lincicome summarizes:

Europe’s deregulatory experiences—and our own—show that nixing cabotage restrictions would not only put additional downward pressure on fares but also likely improve route coverage and maybe even customer service."