It’s time to shed a tear into your tiny plastic cups of soda, because the merger between US Airways and American Airlines is complete.
It’s sad to see another airline fly off into the sunset. It’s also sad to see competition go “buh-bye.”
A key stated goal of this merger — as with the previous Delta/Northwest and United/Continental deals — was to reduce “excess capacity” in domestic passenger aviation.
That’s a polite way of saying less competition and less service. But it’s part of a broader industry agenda to reduce competition and service for American air travelers.
What the merger has done
Smaller cities have felt the pinch. Previously, US Airways and American both served Tallahassee, Fla. — the former routed passengers through its Charlotte hub and the latter through its Dallas and Miami hubs.
But the merged airline cut the Charlotte service, figuring that network access through Dallas and Miami is enough to compete with Delta’s service through Atlanta. When airlines merge, the smallest hubs in the new larger airline tend to lose out and shrink.
Now that four giant air carriers control about 87 percent of the American market, airline executives can turn ‘Capitalism 101’ on its head.
Airlines can intentionally decrease the number of flights as public demand for air travel has steadily increased. It’s the opposite of how a free market economy is supposed to work — if consumer demand is up, companies theoretically respond by increasing supply.
Problem is, airlines don’t compete anymore. They split up the national market into what amounts to regional monopolies, and they collude with each other to set prices and standards.
With four major US airlines, pricing can now be tightly controlled. They’ll take turns proposing fare increases or decreases.
But don’t be fooled — it is a game called, “pretend competition.” Airfares and fees have gone up regularly in 2015.
And American Airlines? It just reported its highest quarterly profit in the company’s history.
When airlines pretend, competition loses.
There are fewer total domestic flights today than back in 2000. That’s astonishing. With more passengers flying, the actual number of flights has not increased.
A decade ago, planes flew on average at around 60 percent load factors. Today they’re flying at nearly 90 percent. That means airlines have been able to fly 50 percent more passengers than back in the early 2000s.
Welcome to ‘last class’
The airline trend of packing as many passengers per plane as possible may reach a new height. The European aircraft manufacturer Airbus Group has applied for a patent on a seat configuration that adds a row of passengers on top of passengers in seats on the floor of the cabin, similar to bunk beds.
Due to tighter seating, the airlines have been able to add another 15 to 20 percent more passengers, all with the same number of planes.
Then there’s the “Economy Class Cabin Hexagon,” proposal. To maximize space, the idea is to take the middle seat and turn it around 180 degrees. Airlines like it that way. If they could, they would stack passengers like firewood.
In a competitive market, an airline would add seats that would make the market more competitive.
More competition would mean airfares might drop. However, don’t count on this. Capacity discipline reduces supply and rising demand means higher prices. The passenger loses, again.
The industry agenda
Mergers, service reductions and collusion are part of a broader industry agenda. Here’s what to watch for in Congress:
Currently, airlines are aggressively lobbying Congress and the Obama administration on a host of issues, from foreign competitors to consumer rules. Among the items on their agenda:
✓ Delta, United and American airlines and the Air Line Pilots Association are pressing the administration for a freeze in the number of flights to the U.S. by Persian Gulf airlines Emirates, Etihad and Qatar.
✓ The three U.S. carriers and their pilot unions are fighting an application by Norwegian Air International, a subsidiary of the third largest low-cost carrier in Europe, to expand its flights to the U.S. from Europe and Asia.
✓ Several airlines took their case all the way to the Supreme Court in an effort to block a Transportation Department regulation that requires the full ticket price, including taxes and fees, be the most prominent fare in the largest type on search screens and in ads.
After they lost, and the rule came into force last year, the airlines twice persuaded the House to pass a bill to roll back the rule. The Senate has shown no interest in taking up the bill, but the industry says the issue isn’t dead.
✓ Airlines object to proposed regulations that would require everyone who sells airline tickets to tell consumers the cost of a first and second checked bag, an advance seat assignment and a carry-on bag on the first search screen where airfares are displayed, rather than waiting until a consumer has selected a fare and is checking out. That way, the Transportation Department reasons, consumers will know the full cost of the trip from the beginning and won’t be surprised later by fees, which can vary widely.
Air traffic control
✓ Airlines are using their political muscle to convince Congress to spin off air traffic control operations from the government to a nonprofit corporation. They say years of federal budget uncertainty have hindered efforts to modernize the air traffic system. Private aircraft operators worry the change would shift costs to them and force them out of busy airports to make more room for airlines.
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 airline find themselves unable to compete.