A recent Wall Street Journal analysis of airline and government data reportedly showed that “Domestic airfares at the busiest U.S. airports were increased less than 1%, on average from 2007 to 2014."
Average fares about the same? I doubt it. The airlines are the sole source of the fares offered, the seat-miles used, the traveling hours, and 'deals.' The 'averages' are constructed using smoke and mirrors. There are few government airfare reports. Advertised fares are a misleading mishmash of options. Year-over-year from 2011 to 2015 airlines' expenses are up a little, revenues and profits are up a lot, and the number of flights operated and passengers transported are level or down.
This idea that airlines are holding fares and profits steady is ridiculous. The fallacy is that an “average fare” isn’t easily determined or uniformly defined. Routes and schedules are not comparable, airline-to-airline, day-to-day or city-to-city, to the regulated fares in the 1970’s or to the domestic system as it was in 2007.
The five carriers that control more than 4/5ths of the domestic seat supply in the U.S are focused on profit, using sophisticated “yield models” to methodically adjust schedules and fleets to maximize profit margins. Resrrvations for most non-stop flights are blocked until city-hub-city flights are sold near the departure day as projected by the computers.
The U.S. Justice Department is investigating whether the carriers colluded on expansion plans. We believe a part of the collusion has always been joining forces to support expanding hubs while guaranteeing slots to the other major airlines.
The investigation followed comments by several airline executives that they planned to limit growth despite cheap fuel. Such restraint could help keep airfares high for the 3 major airlines by circumscribing small airlines' access and invading their regional markets (from the WSJ story). Midwest Airlines was an example that this "works."
The Journal had the airlines saying that they “compete vigorously and make their growth plans independently.” The airlines said that consolidation and other changes “stabilize the industry” and make it possible to “invest in new planes,” which “benefits air travelers.” But from 2007 to 2014, the carriers increased ticket revenues 45% at the hub airports while cutting capacity by about 10%. The increase doesn’t include the fees airlines charge fliers or fees added by airports.
Perhaps it is helpful to understand what role air fares play, if any, in market competition. Every air traveler sees that available fares are higher than advertised fares unless reserved weeks ahead or involve circuitous routes with waits for connecting fights. This is because the actual mileage traveled on average after boarding a flight is minimized only for “legs” or non-stop airport-to-airport flights. And there are fewer of these due to the airline consolidations of connecting flights at their “fortress hubs.”
What about the now increased demand for city-hub-city travel? Compared to 2007, the average city-hub-city trip in the U.S is over 200 miles further. This is in spite of Federal developments of Air Traffic Management capabilities to “widen corridors” and allow flights to fly more independently and make usually shorter or quicker trips from airport to airport.
“Oh,” you say “now I get it. The fares and fees reflect both higher costs and which trip you are taking.”
Demand always exceeds supply at the hubs, by design, and the steeper costs at congested hubs are reflected in gate leases and landing fees and recouped by the airlines as overhead. The higher costs of environmental, health and safety programs are either paid by travelers and subsidized by taxpayers or ignored as trivial.