In the past decade, the U.S. airline industry’s landscape shifted from nine large airlines to four mega-carriers that make up a combined 80% of all U.S. flights.
One consequence of the industry’s consolidation is a cut-back in flight schedules over the past four years that has resulted in an approximately 7% decrease in overall flights, according to a Wall Street Journal report.
The flight cuts haven’t been distributed equally. Airports that are frequently used as hubs to connect flights rather than as final destinations — such as Memphis and Cleveland — saw the number flights shrink 66% and 44.6%, respectively. The shrinkage, and even the closure of hub operations, means fewer connecting flight options for passengers, leaving the pricier, non-stop tickets up for sale.
The second hardest hit airport after Memphis: Newport News in Virginia, which experienced a flight schedule shrinkage of 51%, in part due to Southwest’s cancellation of service to the city after acquiring AirTran, according to the Journal. Milwaukee, Cleveland, Allentown-Bethlehem-Easton, Key West, and Colorado Springs all saw their departing flights decrease over 40% in four years.
The Department of Justice notified the mega-carriers on June 30 that it is investigating them for possible collusion in the schedule reductions in order to boost profits. (The investigation comes less than two years after the government approved the merger of US Airways and American Airlines to create the world’s largest airline.) The consolidation in airlines has been widely blamed for fare hikes. According to an Associated Press report, a lack of competitive pressure is a major factor leading to domestic fares growing faster than inflation. Domestic fares rose 5% over the last decade after adjusting for inflation, not including the fees piled on for baggage or preferred seats.
But not everyone is convinced the consolidation is so bad for passengers. A PricewaterhouseCoopers report in 2014 found that the mega-carriers still face competition from smaller airlines, like low-cost carriers and ultra-low-cost carriers. A dramatic increase in flight departures from some airports, such as St. Pete-Clearwater and Orlando Sanford in Florida (94% and 71% jumps, respectively), underlines that trend. According to the Journal, the increases were primarily driven by new service from low-cost carriers. The PwC report also said that the consolidations have made the industry more reliable and efficient, and “made the industry’s financial outlook much stronger.”
That’s certainly true: across the airline industry, airlines are gearing up for record profits. On Thursday, Southwest reported earning a record $608 million in 2015’s second quarter. United also reported a surging second quarter on Thursday, earning $1.19 billion, up from $789 million in the same quarter last year. A week earlier, Delta posted second quarter earnings of $1.49 billion — jump of 85%. To round out the mega-carrier second quarter earning reports, American will announce on Friday. Expect big profits.
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