What an arcane piece of aviation law says about Britain’s government

PASSENGERS canIAGKLM BABACMAEUEU-NIMBYCMAIATA be strikingly loyal to their airlines’ loyalty schemes. People enjoy collecting points; they enjoy perks, such as swish lounges and bigger baggage allowances, even more. Little wonder that British Airways, a flag carrier, faces a backlash after tweaks to its programme will render its coveted “silver” and “gold” cards out of reach for most leisure travellers. , its parent, hopes a £7bn ($8.6bn) investment programme will fix a reputation for so-so customer service, tatty cabins and bad food. (Analysts seem to think so; its share price is ascendant.) Nonetheless its rivals spy an opportunity: Virgin and Air France-have invited disgruntled fliers to join their programmes.Those competitors would stand a better chance if aviation were a properly liberalised market, in which agile challengers could take on flagging incumbents. If only. Control of slots—the right of an airline to take off or land from an airport at a particular time—is the biggest constraint on competition. holds 51% of those at Heathrow, London’s hub airport (whose chairman also chairs The Economist Group), and 53% at London City, next to Canary Wharf. Regulars may grumble that the cheese toastie is today’s version of the notoriously unappetising British Rail sandwich. Those on early flights to Frankfurt have little choice.The regulation of runways may sound like an arcane concern. But it is a case study of what ails Britain. Call it the parable of the slots. Britain, like other advanced economies, has seen competition weaken for 25 years. Markups have risen; the rate at which young firms displace old ones is falling. Many markets are gummed up. Consumers pay more than they should for baby formula, vets, funerals and much else. The opportunity Brexit presented to adopt a more nimble approach has been passed up. And Sir Keir Starmer’s government is much less gutsy at increasing competition than he claims.The slots regime is a mid-century relic. In Britain—as around the world—rights are grandfathered: as long as an airline uses a slot 80% of the time, it can hold onto it in perpetuity for free. That was fine in the 1960s when runway space was abundant; now that such space is heavily congested it produces a clogged-up market. At Heathrow, 99% of slots are grandfathered: spare ones come up for sale rarely and at a stonking price. Challengers are locked out, or stay small. Inefficiency is rewarded: it is better for an airline to send up small or empty planes than forfeit a slot to a rival.The first cure is more airport capacity—and here the chancellor, Rachel Reeves, is making encouraging sounds about approving the expansion of Heathrow as well as London’s Gatwick and Luton. But the benefit of new terminals and runways will be reduced if you do not also fix how they are used.The economists’ answer is to auction slots, much like radio spectrum. A market-based system would mean new airlines could bid against incumbents; small airlines could grow into serious rivals; customers would enjoy lower prices and better service. Airlines that bore the true value of slots would use them more efficiently, sending bigger planes to more popular destinations; the proceeds could fund new airport infrastructure.The Competition and Markets Authority (), a regulator, has been mustard-keen on such market reform for years; Rishi Sunak’s Conservative government appeared enthusiastic. Sir Keir’s Labour government is not. New ministers have their own priorities, and have concluded that an immensely complicated fight with vested interests is not worth the candle.It is an illustration of how Britain has engineered the worst of all possible Brexits. Since slot rules in Britain were fixed in law, here was that rare thing: a bona fide Brexit opportunity to shake off protectionist rules that cosset creaking national champions. Singapore-on-Thames would welcome Singapore Airlines. Instead Britain has lost market access, thereby weakening competition on British firms, while undertaking precious little of the regulatory simplification that might have fostered it.But the parable of the slots reveals most about the limits of Sir Keir’s radicalism. He talks a good supply-side game, as does Ms Reeves. His speeches to investors are peppered with promises to “rip out the bureaucracy” and unlock “the shock and awe of investment”. Yet he is late in life to this agenda. His canapé-circuit turn resembles Steve Buscemi, a middle-aged actor, who tries and fails miserably to pass as a high-schooler in “30 Rock an American sitcom: “How do you do, fellow Schumpeterians?”Airports are but one example of a lop-sided regulatory agenda. Ministers are placing huge weight on planning reform to boost housebuilding and productivity. But deep thinking on how to fix other markets is in short supply. On January 16th Ms Reeves summoned Britain’s economic regulators for a dressing-down: “fresh ideas” were needed to “drive growth”. This was a bizarre piece of theatre: a six-month-old government should be imposing its agenda on the agencies, not demanding that they rustle one up.The problem with pro-competition reform is that it invariably means annoying incumbents. Sir Keir is happy to bash faceless opponents of growth, such as s and Whitehall bureaucrats. A confrontation with the airline industry would be harder. (Ministers claimed the ousting, on January 21st, of the chairman of the was a sign that they wanted more “pro-business” decisions from regulators.) , which represents the world’s biggest airlines, declares slot auctions a “disaster” that would scramble routes and wreck investment. It would entail political pain today, in the hope of a better deal for consumers tomorrow. It would take a true believer in the power of markets to do it. And Sir Keir, it is becoming clear, is not that.