Not enough airlines are competing.
Airline competition is going to be a big issue this coming year. It is already, but the big airlines are making moves that beg for pushback from those who want to keep them in check and keep a competitive marketplace operating.
Here is the basic situation. Airline competition is losing. If airlines have their way, competition will suffer even more.
Because of mergers, four airlines control 87 percent of the domestic market. That wouldn’t be too bad if the airlines all competed on every route. However, they don’t. Many domestic airports only have service from two of the big airlines. Some, at smaller airports, have no meaningful competition.
Internationally, airlines are banding together to stop competition.
Three airline alliances have been granted antitrust immunity from the Department of Transportation (DOT). The department must have been delusional at the time. They now control more than 80 percent of international flights in and out of the USA. Airline competition loses.
Only four airlines can effectively control pricing.
Any new airfare increases must be matched by the other airlines. Otherwise, where airlines do compete, those with higher airfares will lose market share. So, each airline follows the others. They take turns proposing fare increases. Sometimes these airfare increases are not successful. Don’t be fooled — it is a game the airlines play called, “pretend competition.” Airfares and fees will go up regularly in 2025. When airlines pretend, competition loses.
Only four airlines can effectively control capacity.
A little-known fact is that there are fewer domestic flights today than in 2000. That is amazing. Although there are more passengers, the actual number of flights has not increased.
Back in the day, planes flew on average at around 60 percent load factor. Today, they fly at around 90 percent. That means, just based on load factors, airlines have been able to fly 50 percent more passengers than in the early 2000s. Add the increases in the number of seats packed into planes, and the airlines have been able to add another 15-20 percent more passengers, all with the same number of planes.
Airlines like it that way. If they could, airlines would stack passengers like cordwood. However, the human body is relatively fixed and the airlines have crammed about as many passengers as they can into their planes. At this point, in a competition market, an airline would add seats that would make the market more competitive. More competition would mean airfares might drop. However, don’t hold your breath. Capacity discipline reduces supply and rising demand means higher prices. Competition loses, again.
Airlines are doing all they can to confuse consumers with undisclosed ancillary fees.
For the past almost four years, airlines have been hiding ancillary fees like baggage fees, seat reservation fees, early boarding fees, and so on. There is no way that consumers can easily compare prices across airlines. When factors like what credit card is used to purchase the airfare and at what elite level of what frequent flier program travelers belong, the calculations of possible airfare/fee combinations become overwhelming. Then, when airline rules are added that allow a certain number of passengers flying on the same reservation to share benefits, airline employees cannot even keep track of the permutations. When prices are complex, prices become unfair and deceptive. Competition loses.
Airlines and their unions are working hard to stop any new competition.
Delta, American, and United have all come out against upscale service being provided by Middle Eastern airlines such as Emirates, Etihad, and Qatar Airways. The growth of these airlines has been astronomical. Not only do they offer far better service than US carriers, but they offer better connections to South Asia and Africa, the world’s fastest-growing sector when it comes to a rising middle class.
If the US airlines are allowed to abrogate their open skies treaties that they encouraged DOT to negotiate when they were the top dogs in the airline world, competition will suffer.
Airline competition is losing. DOT needs to take action.
The US airline response that seeks to erase competition is not productive. Competition should be met with better service, a better product, and a marketing campaign that highlights an airline’s strengths, not by restricting trade when airlines find themselves unable to compete.
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Charlie Leocha is the President of Travelers United. He has been working in Washington, DC, for the past 14 years with Congress, the Department of Transportation, and industry stakeholders on travel issues. He was the first consumer representative to the Advisory Committee for Aviation Consumer Protections appointed by the Secretary of Transportation from 2012 through 2018.
