Farewell, US Airways. So long, airline competition

US Airways
By | October 24th, 2015

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.

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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.

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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:

Competition

✓ 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.

Consumer regulations

✓ 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.

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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.



  • Mike

    I for one won’t miss US Airways. I found their service to be the worst out of any of the carriers. That distinction will now go to United, which has completely gone into the crapper since they bought out Continental.

    That said, the lack of competition does suck.

  • MarkKelling

    At least now we won’t hear stories about how someone bought a ticket on AA for a US flight or vice versa and things went wrong and the two halves of the company just point fingers at each other saying “It’s their fault. And we can’t do anything bout it because we really are not merged.”

  • Kairho

    I for one, am quite pleased to see Allegheny Airlines finally bite the dust, even though they leave scattered remnants within American. I started flying them in their Convair 580s and later, when they got a DC-9, in that jet. They were always a disaster with problems of one sort or another on well over half of my flights.

    One time my wife was on a one day business trip, PHL-BDL-BUF-BDL-PHL, and because of a blizzard the BDL-BUF flight was cancelled. She was stuck in BDL and Allegheny wouldn’t bring her back to PHL and because BDL-BUF was cancelled, they cancelled her BDL-PHL flight! Suggested she rent a car! No refund, either! Fortunately, she prevailed (she has friends), had them fly her back to PHL, and she eventually got a refund.

    Buh-bye!

  • MF

    Where are the apologists/free-marketeeers when you need ’em? Surely the trolls could argue that we have more ‘choice’ now, since the arrival of ala-carte/drip pricing, and what about ‘freedumb’ to pay more for less service, and more ‘choices’ to take other means of transport? Does anyone have a suggestion to improve this mess, like let in competition from foreign carriers???

  • Regina Litman

    I have many, mostly wonderful memories of USAirways. I will miss them.

  • MF

    On second thought, why not advocate for allowing foreign competition? If competition is the name of the game, why not allow REAL competition from REAL airlines who could do a better job of providing customer service at a better price? Our airline industry is making record profits & thus need no PROTECTIONIST laws or regulations. Perhaps just advocating for such a thing might scare our carriers to do better. These businesses do not deserve our loyalty, they act as if they are contemptuous of their customers

  • Bill___A

    Why do you think air traffic control would be bad in the hands of a non profit corporation? What is the basis for this? Costs are covered by passenger fees and landing fees. Canada’s has been handled by NAV Canada since 1996 I believe. I rarely see complaints about them, it seems to run pretty well.

  • sirwired

    Firstly, lets address a point you, Chris, and Charlie routinely assert; that airfares are higher today, service lower, etc. I won’t argue that service ain’t what it used to be; that is obvious. But ARE we paying more?

    Using DOT stats for the most basic statistic for the cost of US air travel, Domestic Passenger Yield (the measure of how many cents per mile passengers pay), which, by the way, INCLUDES ancillary fees… twenty years ago (before today’s consolidation) it was 13.26 cents per mile. Last year it was… drum roll please… 15.30 cents. If we adjust it for the increase in the Consumer Price Index, the price per mile have DROPPED by 25%.

    Yes, competition today is reduced. (And internationally, the situation is shameful.) There’s a lot to criticize in today’s airline industry (you have a lot of good points; for instance, fighting against airfare disclosure is stupid, the Qatar thing is silly, etc.), but as is frequent with your articles, some of your points contain wrong/misleading/non-sensical information.

    “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.”

    “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.”

    Why is that “astonishing”? Airlines have been shifting away from regional jets running routes that are both expensive (because of fuel inefficiency) and unprofitable.

    “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.”

    First, I don’t know what your source is, but using statistics compiled from the DOT numbers (http://web.mit.edu/airlinedata/www/Traffic&Capacity.html), This is untrue. Load factors in 2005 were 79%, NOT 60%. Last year they were 84%; no idea what they are yet for ’15 (obviously), but I doubt they’ve improved by 6% in one year.

    But even if true, it doesn’t mean what you say it does. It means they’ve been able more effectively utilize the capacity they have; it says nothing to how many passengers they can or can’t fly.

    And, it appears that if airlines were running with 60% load factors, capacity was very much in “excess” before (wasting untold millions of gallons of fuel, labor hours, plane assets) and the mergers have indeed reduced this shameful waste in environmental resource, unproductive labor, and capital flushed down the toilet.

    Are you saying you’d prefer to keep wasting all that fuel flying empty seats around the country? Would you like your grocery store to discard 40% of all the food that comes in the door, have 40% of the shelves empty, and a bunch of employees walking around twiddling their thumbs?

    “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.”

    I can’t quite tell what your point is because you’ve made a mess of the statistics by conflating the number of flights, load factors, and the number of passengers flying. None of those statistics are actually useful (either mashed together or in isolation) to figure out if total system capacity is up or down. The number of flights and load factors are all affected by the size of the planes used.

    Luckily, we DO have a measure of total capacity; it’s called, appropriately enough, Domestic Available Seat Miles. Looking at the domestic numbers, twenty years ago it was 614 Billion. Last year it was 700 Billion. So it appears that capacity has gone UP (not down), and that any reductions that took place were offset by increases elsewhere.

    You should check out that site I mentioned earlier; it’s fascinating. It contains useful tidbits like:

    – Despite increases in airplane fuel efficiency, total system spend on fuel has by around a factor of approx. SIX in the past 20 years. Even adjusting for increased capacity and changes in the CPI, if airlines HADN’T cut costs/services so severely in the last 20 years, either prices would be much higher today or they would be losing money hand over fist. You, Charlie, et al, keep wondering why the airlines aren’t passing on reductions in fuel cost (or raising service)? It’s because it’s only low(er) in relation to the peak; compared to twenty years ago, it’s EXTREMELY expensive. You wonder where customer service went? It went in the fuel tank.

    Yes, airlines are making a lot of money right now; it’s a cyclical industry. Profits are SUPPOSED to be high when times are good; otherwise nobody would ever want to run an airline…

    It’s certainly a matter of discussion on if we are receiving the value today that we did 20 years ago. But it cannot be argued that even in the face of MUCH higher costs (especially for fuel), airline travel has somehow become even MORE affordable. That doesn’t mean that we, as consumers, should be letting our guard down. But if competition truly was as bad as you say, airline tickets would cost a LOT more money today, not 25% LESS.

  • just me

    I would suggest that you (or somebody) prepare the consumer views on those issues and publish them on all consumer bogs and site so each of us can use it in our opinion that we would send to the proper agencies and proper comissions in Congress. Nobody in government reads blogs – they all must account for what “We The People” actually send them directly. So far nobody is opposing the industry as we do not know how.

  • BMG4ME

    Yes, farewell US Airways and good riddance, I am glad I won’t have to fly with you anymore. Getting rid of a lousy airline I would never fly anymore hardly seems to be to be less competition. It means that the much better American Airlines is now running the old US Airways routes at American Airlines standards, one of the best in the business. Yes I know that in theory it’s actually US Airways with a new name, but everything about the new airline is American, not US Airways.

  • JewelEyed

    I’m scared to fly US metal, so I guess I won’t be able to fly American until they’ve replaced all of it.

  • Lindabator

    because Canada pays a decent wage – highly doubt we would – can’t even pay new pilots a decent one.

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