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One Last Word about the US Airways – American Airlines Nonsense: You Probably Won’t Guess Who Is Responsible for Raising All Those Fares

I wanted to just share one last thing (“last” – yeah right) about the DoJ and the US Airways merger. There’s been lots written about how with consolidation has come an increase in average fares. Let’s take a look:

Check out this chart. It compares average Q1 airfares in 2000, and then again in 2013 for the top 100 airports in the US. You may remember that during that time period we have seen Northwest, Airtran, America West and others disappear, leaving us with 4 major airlines. Certainly we would have seen airfares jump significantly during that time period – with all that consolidation and a 4X increase in the cost of fuel during that period, right?

No. Of those 100 airports, only 16 show an inflation-adjusted increase in fares, and only 6 show a double-digit increase in fares (Sorry, Dallas-Love, Spokane, Reno, Houston-Hobby, Burbank, and Tulsa!).

Hold on – wait just one minute there. Those 6 cities have shown significant (or “significant”) increases in fares over those 13 years. What is similar about those cities? Hm. What is it? I can’t find market share info for Dallas-Love, but Southwest flies the 10 busiest routes out of there.

Spokane – no market share info, but Southwest flies 5 of the 10 busiest routes out of there.

Reno: Southwest has 56% market share.

Houston-Hobby – Southwest has 85% market share.

Burbank: No market share info, but Southwest flies 6 of the 10 busiest routes from there.

Tulsa: I don’t have recent info, but from what I can tell they had the largest market share with roughly 35%.

Dear God, no. No. Those evil, evil passenger-hating fare-raising bastards at Southwest Airlines are causing all of this trouble, while the other poor, poor consumer-loving executives at Delta and United have been driving down fares for 13 years? It can’t be! It just can’t!

Oh, and while we’re talking about fares. Remember flying back in 2000 when things were really crazy? And it used to cost $2,200 to fly transcon at the last minute? I can fly nonstop to LA tomorrow for (a still admittedly ridiculous) $1200.

And in advance? You can fly NY-LA for $325 roundtrip, sometimes less.

It seems to me that the cheapest fares in many markets are hovering around where they’ve always been. The top fares in those markets that were ridiculous have come down a bit. And the vast middle range of fares has crept up in many cases. To the average leisure consumer, they can still fly from New York to Florida for $99 each way much of the year.

Consolidation has not caused fares to go up – unless you’re stuck in a market served by Southwest.

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  1. What you have failed to mention and what I think a lot of the bloggers have missed, is that the fare increases might only be marginal at most over the past 13 years, but back in 2000 there were hardly any airlines charging for your first and second bags to fly. Airlines don’t need to raise prices much because they are whacking the consumer on incidentals. Just a thought…

    • Yes, incidentals have increased over that time. But inflation-adjusted airfares (according to that chart) have actually dropped over that time while fuel has increased in price wayyyyyy beyond inflation.

      Flying is a bargain, and airlines have given people plenty of ways to avoid paying those fees.

      • I don’t disagree that flying is a bargain. It’s funny to see flights cheaper than Amtrak (pretty much government run) very often. My point is that if the airline just gave you a fare with the built in costs of incidentals, airfares would probably be higher than what you saw back in 2000. Good post, just making a point.

        • Which is exactly why the airlines have stripped these fees from the cost of a ticket…the bundled cost of ALL amenities was traditionally spread amongst ALL passengers as reflected in the price of tickets. Each individual consumer now has the ability to control the total cost of their ticket purchase by virtue of their choice of amenities. (Yes, you used to pay for that first class meal that you did not eat while sitting in coach!) Consumers don’t seem to understand that today’s fees are not simply added on to the old model of ticket pricing methodology. Those costs were stripped out and made optional!

  2. I appreciate your honesty saying you own some USAIR stock but I have to respectfully disagree and I am against the merger for several reasons. However, please read this below and understand that this type of “collusion” already taking place before the merger is very disturbing.

    That memo is nothing compared to what I read below that was included in the DOJ lawsuit; this is the reason the merger will never go thru; the DOJ takes COLLUSION very seriously; thanks for showing your true colors Doug

    The juiciest bit to me was when Doug Parker is alleged to have forwarded an email to a rival airline CEO about how bad a “triple miles” promotion was for the airline industry profitability. I was shocked to read this because many large companies make it VERY clear in their training to employees that such attempts to collude could be potentially illegal.

    In 2010, one of US Airways’ larger rivals extended a “triple miles” promotion that set off a market share battle among legacy carriers. The rival airline was also expanding into new markets and was rumored to be returning planes to its fleet that had been mothballed during the recession. US Airways’ CEO complained about these aggressive maneuvers, stating to his senior executives that such actions were “hurting [the rival airline’s] profitability – and unfortunately everyone else’s.”

    US Airways’ senior management debated over email about how best to get the rival airline’s attention and bring it back in line with the rest of the industry. In that email thread, US Airways’ CEO urged the other executives to “portray these guys as idiots to Wall Street and anyone else who’ll listen.”

    Ultimately, to make sure the message was received, US Airways’ CEO forwarded the email chain—and its candid discussion about how aggressive competition would be bad for the industry—directly to the CEO of the rival airline. (The rival’s CEO immediately responded that it was an inappropriate communication that he was referring to his general counsel.)

    Translation: Doug Parker pushes the envelope to get other airlines to not compete and maintain overall industry profitability.


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