The head of EasyJet has characterized European Union baggage proposals as reflecting poor economic literacy among policymakers regarding how market pricing functions.
The proposed regulations would mandate free cabin baggage across European aviation. European lawmakers voted overwhelmingly to support legislation requiring airlines to provide allowances for both personal items and larger carry-on bags.
Kenton Jarvis suggests that basic economic principles demonstrate why unbundled pricing can enhance consumer welfare. Allowing passengers to purchase only services they value prevents forced cross-subsidization and improves market efficiency.
Policymakers who don’t understand these principles may craft regulations with good intentions but counterproductive effects. Better economic literacy in regulatory institutions could prevent such policy mistakes.
The airline generates billions annually from ancillary services that enable efficient pricing. EasyJet reported quarterly losses of £93 million while managing through policy uncertainties and seeing strong booking trends.