DALLAS (AP) — The wave of consolidation that swept the U.S. airline industry has markedly reduced competition at many of the nation’s major airports, and passengers appear to be paying the price in higher fares and fees, an Associated Press analysis has found.
Over the past decade, mega-mergers reduced nine large U.S. airlines to four — American, United, Delta and Southwest — with the result that travelers are increasingly finding their home airport dominated by just one or two players.
Over the same period, domestic airfares rose faster than inflation, and analysts believe one leading factor is the decline in competitive pressure.
“Airlines aren’t going at each other like they used to,” said Mike Boyd, an aviation consultant frequently hired by airports. “They have their turf, and they very rarely go to the mattresses with one another.”
At 40 of the 100 largest U.S. airports, a single airline controls a majority of the market, as measured by the number of seats for sale, up from 34 airports a decade earlier. At 93 of the top 100, one or two airlines control a majority of the seats, an increase from 78 airports, according to AP’s analysis of data from Diio, an airline-schedule tracking service.
Overall, domestic fares climbed 5 percent over the past 10 years, after adjusting for inflation. And that doesn’t include the $25 checked bag fee and other add-on charges that many fliers now pay.
To be sure, other factors have contributed to higher fares, among them a stronger economy, longer average flight distances and, for most of the past few years, some of the highest fuel prices in history. However, analysts believe consolidation freed airlines to charge more.
The strategy is paying off: In the past two years, U.S. airlines made a record $19.7 billion in profits, even though air travel is growing only modestly.
The airlines’ main trade group, Airlines for America, said the fare increases reflect stronger demand for travel and are not solely a result of the mergers. The group noted that airlines have used their profits to buy new jets and update airport facilities.
American Airlines CEO Doug Parker rejected the notion that consolidation has hurt travelers.
“We have increased flying out of each of our hubs,” Parker said. “We want to expand. That’s good for consumers, not bad.”
The Justice Department notified the four largest airlines on June 30 that it is investigating whether they are colluding to drive up fares by limiting the availability of flights and seats. Those four control more than 80 percent of the U.S. market.
There was a time — before deregulation in 1978 — when fliers had even fewer choices and paid higher fares than they do now. Back then, the U.S. government controlled which airlines flew to which cities and how much they could charge. Competition intensified in the 1980s. As new airlines entered the market, fares dropped precipitously.
After 9/11 and the recession that hit immediately afterward, major airlines were in financial shambles. Several restructured through bankruptcy, and a wave of deals starting in 2008 led to the combinations of Delta and Northwest, United and Continental, Southwest and AirTran, and American and US Airways.
Justice Department antitrust regulators let the deals go through but forced airlines in a few cases to give up some of their spots at key airports to try to encourage competition.
Still, “the airline industry is less competitive now than it used to be,” said Seth Kaplan, managing partner of industry newsletter Airline Weekly. “Some of us used to have eight or nine airlines to choose from. Now we have maybe four or five, just as we have four or five cellphone companies to choose from.”