Airlines Face Investigation Over Plans To Lower Capacity And Increase Prices Across The Country

Airlines Face Investigation Over Plans To Lower Capacity And Increase Prices Across The Country

While airline services and ticket prices have largely remained stagnant at major hubs over recent years, the same cannot be said for smaller airports. An analysis of industry and government data shows that carriers have been largely cutting flights and increasing fare prices at smaller airports across the nation.

From 2007 to 2014, the price of airfare at the nation’s ten busiest airports had increased by less than 1%, and the number of domestic seats decreased by 1.6%. However, the next ninety largest airports showed that airlines had reduced the number of their domestic seats by 14.5% and increased their airfare costs by 6.4%.

This unevenly distributed impact is the result of a shift in airline strategy.

Since airline deregulation occurred in 1978, carriers have been seeking to increase market share, even if it comes at the expense of profits. Airline carriers have lost billions of dollars during this time.

Currently, four airline carriers control more than 82% of domestic seats in the United States. These airlines include American Airlines, United, Delta, and Southwest. With the airline industry in its current form, these carriers are totally focused on profits, and they have been critically adjusting their schedules and routes in order to obtain maximum profit margins. This often involves focusing on major hubs while abandoning smaller regional airports.

President of aviation consulting firm Boyd Group International Mike Boyd says, “Airlines are just moving their capacity where they can make more money, and you can’t make money in smaller communities. As a corollary, the automobile is becoming a more important part of air travel. You might have to drive an hour for the flight you want.”

Some people suspect foul play is involved in the form of an airline cartel.

The United States Justice Department is currently undertaking an investigation as to whether or not the four major carriers secretly worked together on their plans of expansion. The investigation came after several airline executives said that they were planning to restrict their growth despite a decrease in the price of airline fuel. By limiting their growth, the carriers can keep airfare prices high.

The airline carriers maintain that they vigorously compete against one another and that they make their plans for growth independently. They also claim that airline consolidation has made the industry more stable, while making it possible for them to invest in new planes.

Some other reasons for the abandonment of smaller airports by airlines are rapidly changing fuel prices and the financial crisis that took place a few years ago. As times got tough, airline carriers had to retract, and it was the smaller airports where demand is lower that received most of the cuts. Airlines make more money by concentrating their resources at major hubs. By doing so, airlines are able to reduce costs while also being able to serve more cities. However, travelers are inconvenienced because they are often forced to travel to distant airports and/or catch connecting flights at major hubs.

Arline researcher at MIT Michael Wittman says, “Point-to-point traffic is really gone at this point. Almost 100% of flights among the big legacy carriers begin or end at hubs.”
Last year, the ten biggest airports in the nation accounted for roughly 35% of the nearly 834 million domestic seats available. This represents an increase of 2.5 percentage points from 2007. Meanwhile, the next 90 largest airports represent 58% of all domestic seats, down 2.5 percentage points during this time period.

Major airports such as Los Angeles, San Francisco, and Charlotte experienced heavy domestic seat increases. However, not all mega-hubs experienced a major expansion. For example Chicago O’Hare and Phoenix Sky Harbor International Airport faced larger than average declines in seats along with increases in airfare.

Another trend shows airline carriers shifting away from secondary airports in larger cities in order to focus on major gateways. In the primary airports of Los Angeles, San Francisco, and Boston, airlines had increased their number of domestic seats 10.3% and decreased domestic airfares by 4.3% from 2007 to 2014. However, the eight smaller airports in the cities saw the number of domestic seats fall by nearly a third, while the prices of fares increased by 1.7%. Additionally, deep cuts were made at smaller hubs, including Cincinnati, Cleveland, and Memphis.

Another factor concerns the trend of airlines to focus on utilizing larger jets with denser seating. These larger airplanes have enabled airlines to reduce their overall number of flights while still increasing the total number of available seats. Smaller airplanes have become less profitable since they are unable to support enough passengers to cover the cost of fuel.

In the near future, it is very likely that these trends will continue. Airlines are focusing on making as much money as possible, and the easiest way for them to do so is to focus on big airports and big airplanes. However, this might lead to small regional airports becoming a thing of the past.

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