In airline policy, Washington’s focus should be on competition
Earlier this month, the U.S. Department of Justice (DOJ) announced it was investigating whether major U.S. airlines are colluding to keep airfares high by intentionally limiting the number of seats available to passengers. At least 11 additional lawsuits have been filed by customers alleging the same. As described by Sen. Richard Blumenthal (D-Conn.), it’s “Economics 101. Reducing supply with rising demand means increased prices.” He added, “Consumers are suffering rising fares and other added charges that seem to be the result of excessive market power concentrated in too few hands and potential misuse of that power.”
As the senator alludes, the number of airlines has dramatically shrunk in the last few years from nine major carriers down to four, who control an astonishing 80 percent of all route capacity. Meanwhile, airlines are reporting record profits. USA Today recently reported, “Air travelers wondering how they would experience the recent wave of airline mergers appear to have an answer: Airplanes are more crowded than ever, fares remain at a five-year high despite plummeting fuel costs—and airlines are reporting record profits and soaring stock prices.”
For those of us who fly regularly, it’s obvious the air travel experience isn’t what it used to be. Passengers are paying more and getting less for our money. Regardless if DOJ can prove collusion among the airlines, there are many practices the airlines use to limit competition and place short-term profits above long-term growth and customer satisfaction. Congress now has a monumental opportunity this year to use the FAA reauthorization bill to improve air travel for all Americans.
Let’s take a quick look at how the airlines limit competition. One method is to limit the number of carriers flying into airports and protecting their hubs. In a practice called “gate sitting,” airlines use the gates they lease for the minimum number of flights per day – sometimes only one – just to block competitors from having access to those slots.
The big three legacy carriers are vigorously opposed to airport infrastructure improvements that would add runways and terminals and allow more carriers access to those facilities. Airlines will tell you all day long how much they invest in their own terminal space. But it is notable that those projects tend to be geared toward items that merely allow them to profit even more, like “loyalty lounges.” And polls consistently show that consumers are less concerned about more cell phone charging stations than they are with problems—delays, cancellations, high prices and lack of airline choice—that would diminish with added capacity.
Perhaps most concerning to travelers, a significant portion of airline’s revenue comes from the seemingly endless add-on fees they charge travelers—on everything from checked bags and seat selection, to those reviled ticket change fees. Airlines used to include these charges in the base cost of airfare. But since the IRS ruled those fees aren’t taxable, while base ticket revenues are, carriers have every incentive to collect as much of their cash as possible through fees.
With limited competition, pricing in general has been an endless charade. Depending on where you want to go, passengers have little or no choice when choosing which airline to fly. The days of taking your business to a competitor who offers better value are nearly over.
Between the ongoing investigation by DOJ and the upcoming FAA reauthorization bill, the opportunity is ripe for Washington to put the voice of the traveler—not the big airlines—at the center of this debate.
While writing the FAA bill, Congress should stop and think if the U.S. air travel system is meant to benefit the nearly 900 million individual passengers who fly on it each year or the four major airlines and their bank accounts.
Travelers’ Voice is an organization representing thousands of concerned passengers who want a better air travel system, advocating for Value, Options, Infrastructure, Competition and Efficiency in air travel policy. We ask Congress to stand up for travelers and hear our voice while writing the 2015 FAA reauthorization, doing everything they can to restore competition in the airline market for passengers’ sake.
Bohn is the executive director for Travelers’ Voice, a national coalition of flyers and businesses that support access to safe, efficient, and commercially competitive air travel for all Americans.