The last five years of airline “consolidation” have not been good for consumers. According to the U.S. Department of Transportation, the inflation-adjusted average airfare has increased nearly 10 percent since 2009. Competitors who used to keep costs low have been gobbled up by the big three airlines – US Airways Group, United Continental Holdings, and Delta – leaving consumers with few places to turn if they cannot afford the higher prices.
This gives the big three pricing power over the most lucrative flight routes, especially transatlantic flights. And that means higher fares for consumers. A misguided regulatory regime allowed this to happen. It’s high time that airline regulators switch priorities, from protecting airlines to protecting consumers.
At Consumer Action – the organization where I serve as executive director – we advocate for pro-consumer changes in many industries. In the airline industry, that means encouraging new carriers to enter the marketplace or, at the very least, not standing in their way when they try to do so.
That is why we are disturbed that the U.S. DOT is considering denying Norwegian Air’s application to start providing transatlantic flights from U.S. cities like Oakland, Orlando, and Ft. Lauderdale to destinations all over Europe.
As expected, the big three airlines have been lobbying Congress and DOT to keep a low-cost competitor out of some of their most lucrative routes. As consumer advocacy organizations like ours know all too well, companies with a stranglehold on the market will fight tooth and nail to keep out competition.
Yes, the airlines dress up their arguments. In this case, they are making protectionist arguments against foreign competition – which are at best misleading, as Norwegian Air has spent $11.4 billion with American airplane manufacturer Boeing to build planes to service these routes. The airlines also make labor-protection arguments that don’t stand up to scrutiny – all U.S.-based pilots and crews are subject to U.S. labor protections, regardless of the nationality of their airline.
The legacy airlines only want DOT to deny Norwegian Air’s application so they can keep their monopoly on lucrative routes.
The U.S. government using its regulatory power to restrict airline competition creates real victims. Where flights are competitive – like those between Oslo and New York City, which run from about $500 roundtrip for a non-stop flight – they are inexpensive. When flights are not competitive – like those between New York and Paris, where a non-stop roundtrip flight runs almost $1100 – they are expensive. Norwegian Air (admittedly, a biased source) reckons that competition for transatlantic flights could save consumers over $100 million every year.
Regulation is supposed to protect consumers – not monopolies. It’s crucial that the DOT follow that principle and grant Norwegian Air’s application. Otherwise, the price of your seat on the plane will get higher and higher.
McEldowney is executive director of Consumer Action, a champion of underrepresented consumers nationwide since 1971.