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Airline Monopolies 
Back to the Future



Nov. 10, 2015 



Last week, that storied American subculture of illicit dealings, corruption and power structure made a startling return to news headlines.

The big three US airlines were accused by their smaller rivals of putting a stranglehold on competition at the three major NYC area airports.

Top executives from Virgin America, Frontier Airlines, Allegiant Air, Spirit Airlines and Alaska Airlines sent a letter to the Federal Aviation Administration and the US Transportation Department to make it easier to obtain slots at New York JFK, LaGuardia and Newark.

In the letter, the smaller airlines accuse the big three of having a “vise grip” on hundreds of slots while they “struggle to obtain even one or two slot pairs”. 
A landing slot, takeoff slot, or airport slot is a right granted by an airport which allows the slot holder to schedule a landing or departure during a specific time period. Landing slots are allocated in accordance with guidelines set down by the International Air Transport Associations Worldwide Airport Slots Group and overseen by the FAA.

The big three airlines paid nothing to get these slots. They were given by government action. The airlines do not own them, they belong to the government, so government action can take them away and redistribute them. Just ask the Harrimans, the Vanderbilts & Rockefellers about this.

The big three airlines account for 91% of all slots operated by US passengers at Newark 81% of slots at LGA, and 63% of slots at JFK. By contrast, the smaller carriers operate less than 1% of slots at JFK and LGA, and less than 2% at EWR.

Yes, in their alternative universe, the major airline CEOs think that the only way they can compete is to, well, have less competition!

The letter gives incredible insight into the spectacle at a time when depictions of mafia power are mostly relegated to re-runs of The Sopranos and Hollywood movies.

America The Banana Republic?

The ongoing injustice is just the latest example of a disturbing trend that threatens to put the Land of the Free and Home of the Brave on a par with Zimbabwe, Venezuela, and Equatorial Guinea. 

Back in September, the CEO of United Airlines along with two top lieutenants were fired related to a federal investigation surrounding a special weekly flight from Newark to Columbia, S.C., allegedly for David Samson, the former chairman of the Port Authority of New York and New Jersey.

Also over the summer, the Department of Justice opened a price-fixing investigation into several US airlines, alleging that the airlines have conspired to limit seat capacity to either maintain or drive up ticket fares.

Where’s the line between “business as usual” and corporate corruption? 

During the last 10 years, the Associated Press reported that domestic airfares rose faster than inflation. Why?

The AP showed that competition at the biggest airports across the country has been reduced through mergers, creating a situation where passengers are paying higher fares and fees. 
Per the AP analysis, a single airline controls a majority of the market at 40 of the top 100 U.S. airports. At 93 of the top 100, one or two airlines control a majority of the seats. 
To break it down, it is striking to see the effect that consolidation has had at specific airports. The AP found that consolidation has had a striking effect at certain airports, altering the competitive landscape. 

* In Indianapolis, the two leading airlines controlled just 37 percent of the seats a decade ago, and domestic fares were 9 percent below the national average. Then the city’s main airline, ATA, went bankrupt and was bought by Southwest, and its No. 2 carrier, Northwest, was absorbed by Delta. Now two airlines control 56 percent of the seats, and airfares are 6 percent above the national average.

* The Dayton, Ohio, airport was served by 10 airlines in 2005, and fares were 5 percent below average. Today, just four airlines fly there and prices are almost 10 percent above average.

* Big hub airports aren’t immune. In 2005, US Airways controlled nearly 66 percent of the seats in Philadelphia. Now that US Airways has merged with American, the combined airline has 77 percent of the seats. Airfare has gone from 4 percent below average to 10 percent above it.

* Delta’s hold on Atlanta, the world’s busiest airport, increased during that same period from 78 percent of seats to just over 80 percent. At the same time, low-cost AirTran merged into Southwest and reduced flights there. Domestic airfares at the airport went from nearly 6 percent below average to 11 percent above.

* Some cities are actually seeing lower fares than they did a decade ago. Prices in Denver were once 5.6 percent higher than the national average. Now that United’s market share there has dropped to 41 percent from 56 percent, fares are almost 15 percent lower than the rest of the country.

In most markets, you’re choosing between two airlines. In some, there is no choice. That’s one big reason why the airlines are also trying to put a chokehold on further competition in international markets by bullying foreign carriers such as Norwegian Air and the three major Gulf airlines. 

So powerful is the entrenched power structure within the industry that even privileged state carriers find it hard to obtain permission to establish new air routes originating from their rivals’ base areas.

It’s Called A Shared Monopoly 

There are more important interests than the greed of a small and exclusive club of corporate robber barons. America needs a safe and dependable transportation network, providing decent service at a fair price. Responsible government oversight of this important infrastructure industry is essential to restore its position as a servant of the public interest.

Ensuring fair competitoin and market access for all is an essential function of government. People often forget that we, the flying public, are the intended beneficiaries of rules and regulations governing airline operations.

Airport slots belong to the people of the USA. Carriers can rent use of the airspace and runways on an equal basis. They are public assets used by private companies for profit. Allowing private companies to own public assets in perpetuity is a dangerous precedent.

It’s about competition. And that is VERY American.


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