“It is about promoting that Canarian citizens access markets and opportunities under the same conditions as any other citizen”, highlights the university professor of Applied Economic Analysis of the ULPGC.
Ofelia Betancor Cruz, Professor at the Department of Applied Economic Analysis of the ULPGC, participated yesterday in the meeting of the technical committee that marks the beginning of the Summit on Transport and Mobility of Extrapeninsular Territories today. Betancor points out that to stop the rise in air prices as a result of the application of 75%, there is no single solution.
What is the solution to stop the price hike due to the application of 75%?
We are probably facing a regulatory failure. In other words, a regulation has been implemented without having sufficiently analyzed its consequences. This would be the first. Surely, the solution is not unique for all markets and for all routes. For example, you have to keep in mind the percentage of residents on each route. Of course, the solution from my point of view is not to make declarations of Public Service Obligation (OSP) with the Peninsula. That is a mistake on routes where we have a lot of traffic, such as those that connect the Islands with the capitals with more than one and a half million passengers. Intervening in these markets with OSP implies regulating the market again and would surely be counterproductive.
Is it more conducive to disintervening the market, for it to regulate itself?
Free markets where it is intervened in terms of subsidies to the resident for equity reasons. In other words, it is about promoting that Canarian citizens access markets and opportunities under the same conditions as any other Spanish citizen. And if this is the objective, some type of subsidy will have to be implemented, but not in any way without having anticipated the consequences well in advance.
At this point, what can be done?
What can be done is to review each particular route. The solution is not unique, for sure. A route with 1.5 million passengers is not the same as another with 50,000, that there are three airlines to which there is one, or that they are contestable markets, that is, that are attainable with the entry of new companies. There are no unique solutions and you have to think about them very well.
A solution for each case.
Exactly and, above all, to be considered. I do not have all the data, but I know that studies are being done. You would have to look at each particular route to see which is the best solution.
And lower the subsidy?
Not necessarily lowering the subsidy, but the form it takes. It can be a fixed subsidy, not necessarily that is paid to the airlines, that still takes a specific form determined for students or that takes the form of a discount within the personal income tax. You have to look for alternative formulas. It seems that the one that is being applied right now is not the most convenient.
Have the control mechanisms failed?
I think we are facing a regulatory failure. In other words, a regulation has been implemented that has produced unwanted effects. It was desired that the price observed by passengers would fall and it has not always been this way. And this depends on the conditions of the route, the conditions of competition and, very importantly, how many people on this route are residents or not.
Would the establishment of maximum prices cause the departure of airlines?
This is not the way out. The OSP is a safeguard of European regulations. It implies that the market is regulated and that there are maximum prices. This may make sense in certain cases. That is one thing and another that on routes with 1.5 million we regulate prices. That is complete nonsense. It is not the solution at all, you have to let the market work and, yes, ensure that airlines do not adopt anti-competitive practices. It is the only thing that should be done and I believe that there are mechanisms for it: the mechanisms implemented by the competition authorities.