Issues

ICYMI – American Prospect Article Highlights the Big Airlines’ Record of Collusive and Anticompetitive Behavior


Washington, DC – In case you missed it, the fall issue of The American Prospect highlights that since the airlines have become more consolidated, they have increasingly colluded and acted anticompetitively, leaving consumers and communities with higher fares, more fees, less seat space, fewer choices, less competition, and even fewer routes to smaller towns.  The airlines have even admitted that they don’t try to fix delays because it doesn’t help their bottom line.  It’s time to say no to the airlines’ increasingly anticompetitive behavior and power grab over air traffic control.

The Airlines “Claim” Airfares Are Down, But Consumers Pay More from Endless Fees

  • The airlines like to try to say that passengers are paying less in airfares, but it is a lie – they are actually paying more as passengers are charged for “practically everything you used to get for free on a plane now costs you: a hot meal, a comfortable seat, an in-flight movie, checked baggage, the flexibility to change flights.” (The American Prospect, Fall 2017)
  • All of this has led to hidden fees making up more and more of their revenue; “Fees and other charges represented a little over one-tenth of all revenue in 1995; today the figure is over one-quarter. Last year, U.S. airlines made $20.2 billion in ancillary revenue, according to research firm Idea Works; that’s more than two times industry profits.”(The American Prospect, Fall 2017)
  • On top of all the endless fees that the airlines now charge, the airlines have continued to add fuel surcharges “and kept them on even after oil prices dropped; in 2011 they raised base fares when FAA authorization lapsed and federal taxes could not be collected temporarily, pocketing the difference without the consumer realizing it.” (The American Prospect, Fall 2017)

The Airlines Blatantly Admit They Don’t Try to Alleviate Delays Because it Doesn’t Help their Bottom Line

  • “‘We don’t necessarily believe that it’s cost-effective to end up in the top quartile for on-time performance,’ senior vice president at Frontier Airlines Daniel Shurz said to Bloomberg.” (The American Prospect, Fall 2017)
  • According to a report from the Department of Transportation Inspector General, “We estimated that when a market’s service options shrank from three airlines to two, the length of delays in the market increased by 25.3 percent.”   (DOT Inspector General, April 2014)

Airlines Have Pulled Out of Small Cities, Devastating Communities

  • In the past several decades, the airlines have starved smaller cities of access:  “By the 1980s, the only way to fly into state capitals like Dover, Delaware, or Salem, Oregon, was by private plane. Inaccessibility made these outposts less attractive to business, with jarring effects to local economies.” (The American Prospect, Fall 2017)
  • In addition, according to GAO, “approximately 1.2 million scheduled domestic flights were eliminated from 2007 through 2013 at large-, medium-, and small-hub, and nonhub airports. Scheduled departures at medium-hub airports decreased nearly 24 percent between 2007 and 2013… about 20 percent at small-hub airports over the same time period.” (http://www.gao.gov/assets/670/664060.pdf)

The Big Four Airlines Are Not Only Acting Anticompetitively, They Actively Colluding and Running the Industry Like a Cartel

  • “The notion that airlines coordinate is comically self-evident.”  While one would think the remaining airlines would be in fierce competition, it’s actually they exact opposite; “There is a tacit understanding to stay out of each other’s turf, to protect everyone’s pricing power; competing airlines only schedule a handful of flights into a competitor’s hub. ‘You don’t find Delta trying to get into Chicago, you don’t find United getting into Minneapolis or Atlanta,’ says Morris [David Morris, co-founder of the Institute for Local Self-Reliance] ‘You have these little fiefdoms.’” (The American Prospect, Fall 2017)
  • In addition, “capacity cutbacks, the focus of DOJ’s collusion investigation, are practically celebrated inside the airlines as one of the major legacies of deregulation and consolidation. From 55 percent targets in the 1970s, planes are now nearly 85 percent full on average, and that doesn’t count crew members shuttling to catch their next flight. Supply and demand dictates that fewer seats lead to higher fares, while maximizing revenue from every takeoff. Airline executives want to keep it that way; in industry conferences, they’ve explicitly talked of maintaining ‘capacity discipline’ on flight schedules.” (The American Prospect, Fall 2017)
  • “In 93 of the top 100 airports, either one or two airlines control a majority of all seats. There is a tacit understanding to stay out of each other’s turf, to protect everyone’s pricing power; competing airlines only schedule a handful of flights into a competitor’s hub.” (The American Prospect, Fall 2017)
  • This much has been admitted by the major airlines, as Scott Kirby, former CEO of American Airlines, said shortly after US Airways merged with American Airlines; “Three successful fare increases – [we were] able to pass along to customers because of consolidation,” (ProPublica, 2016)
  • On October 11th, 2017, Gordon Bethune, the former CEO of Continental Airlines said; “These guys have learned their lesson because American, United, Delta, and Southwest are not going to tolerate somebody buying their customers. That’s why things are so stable. Those four guys don’t try to buy each other’s customers because they’re not stupid and we finally got some brilliant people running some airlines, doing some smart things.” (CNBC, Squawk on the Street, October 11, 2017)
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