Friday, July 29, 2005

Economic Nonsense

Given the clarity - nay, purity! - of the stream of knowledge and harmony that is mathematics, your monoglot Pedant-General is exceptionally loathe even to paddle in the stagnant, murky and polluted sewer of economics.

However, he is thrilled, not just to spot a montrous howler as this, but to beat Tim Worstall to it at that.

So, here we have "the Director-General of the Federation of Tour Operators" castigating scheduled airlines in general for their failure to have an ATOL type scheme in place to support stranded customers. This is, perhaps, a fair comment, assuming we leave aside the incredibly onerous obligations and regulatory hoop-jumping required to get an airline operator's licence.

What is NOT fair is his proposed remedy:
"... a simple £1 levy on all air tickets to fund a similar system for airline passengers."
In order to provide a contigency fund against a one-off event - that of the failure of an airline - and of a largely fixed liability - that of the total number of passengers that an airline could carry at any one time - he proposes an entirely variable surcharge.

This seems to be a staggeringly basic error.

However, when we contrast this with the mechanism used by ATOL, we find that the ATOL bond is, errr..., a fixed amount lodged with the CAA and which is dependent upon, err...., the carrying capacity of the tour operator, it would appear that there is possibly some other motive at play on the part of our illustrious letter writer.

What would an additional £1 per ticket do to, say, Ryanair's attractiveness to holiday makers? Probably the same as Ryanair's fares have done to ATOL's market share.

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