Many people tend to believe that airline mergers have a negative impact on cheap travel options, such as cheap airplane tickets, discount travel deals, and cheap vacation packages, assuming that fewer airlines will result in less competition which in turn will be ultimately responsible for higher airline ticket prices.
A recently published (by the auditing and consulting firm PwC) report claims that the mega airline mergers of the past several years have resulted in better on-time performance, fewer lost bags, and fewer and smaller ticket price increases than anticipated in the face of declining competition. The overall finding of this report is that recent airline mergers have benefited more consumers than they have hurt.
U.S. domestic airfares have increased an average of 2 percent each year between 2004 and 2014 and actually fallen 0.5 percent annually when adjusted for inflation. These figures are calculated on base fare comparisons and do not factor in the many add on fees passengers often face, such as now commonly paying $50 round trip to check a single bag.
The news is not so good for fliers in cities that have lost service due to capacity cuts, the closing of secondary hubs, and other ancillary effects of a consolidating industry.
The report noted that often low cost carriers (LCCs) force larger national airlines to keep their tickets priced competitively. The report found in markets where LCCs started flying average ticket prices fell 5 percent between 2008 and 2013. Markets in which LCCs pulled out saw average fares grow by 28 percent.
Today four airlines control 80 percent of the U.S. domestic markets. Passengers now have fewer choices, are often unhappy with the service they receive in the air, and have to pay for almost any type of extra.
Some airline experts are worried because the remaining airlines maintain their control, in part, by ceding select cities to their competitors. The argument is that the largest airlines tend to recognize each others fortress hubs, letting them be kings of those hubs.
Recently American Airlines announced that it would stop offering nonstop service from New Yorks LaGuardia Airport to Cleveland and Minneapolis (as a result of its antitrust settlement with the Justice Department) effectively leaving nonstop service out of those cities to Delta and United.
The Consumer Federation of America recently observed The problem isnt the mergers; its that the industry doesnt support sufficient competition to deliver the customer experience we expect from a competitive market.
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