Jeff Chiu/AP Photo
Travelers check in at United desks at San Francisco International Airport during the coronavirus outbreak, November 24, 2020.
Making summer travel plans? Have you noticed that airfares have headed skyward? Average domestic airfare is up a staggering 40 percent since the beginning of 2022. According to Hopper Research, fares on flights to L.A. are up 66 percent, 77 percent to Orlando, 64 percent to Las Vegas, 55 percent to Miami, and 53 percent to Denver.
For the most part, this is not the result of rising fuel costs. A Delta exec told a recent investors’ conference that about 10 percent of higher ticket prices is the result of more expensive fuel. At that same conference, JetBlue CEO Robin Hayes boasted of “incredible revenue momentum,” adding that “we’re still dealing with pent-up demand.”
The airlines, with ever more concentrated market power and ever fewer competitive routes, are raising fares—because they can. These are the same airlines that took $50 billion of taxpayer relief early in the pandemic.
With post-pandemic travel demand rising, the airlines are not adding flights or seats as fast as demand is increasing. Seat capacity is still around 8 percent below its pre-pandemic peak. Rather, they are flying as full as they can, and jacking up prices.
Speaking at the same investor conference, United Airlines Chief Commercial Officer Andrew Nocella bragged that United deliberately held back seats for summer travel in anticipation of a rebound so it could charge more for tickets when bookings resumed, post-omicron. And it’s working, he added.
Rising airfares are another aspect of inflation that has nothing to do with supposedly overheated general demand—and everything to do with pricing power. Demand for air travel is up because the pandemic is winding down, not because consumers have scads of extra money to spend. Raising interest rates or cutting public spending to engineer a recession, à la Larry Summers, would do nothing to restrain this kind of price-gouging.
Today, four airlines—American, Southwest, Delta, and United—control 80 percent of the domestic market. As Sen. Elizabeth Warren and colleagues pointed out in a recent letter to antitrust authorities and Transportation Secretary Pete Buttigieg, the mergers of Delta/Northwest in 2008, United/Continental in 2010, and American/US Airways in 2013 only increased monopoly pricing power.
Warren was warning against the proposed takeover of low-fare Spirit Airlines by Frontier. Now, JetBlue has swooped in with a better offer—that would further reduce competition. JetBlue is already attempting to create a code-sharing “Northeast Alliance” with American, at hubs in New York City and Boston, which the Justice Department has challenged in court.
Biden’s newly invigorated antitrust officials should not only block this latest proposed merger. They should launch a broad investigation of monopoly routes and price-gouging in the airline industry as a whole. If redoubled antitrust enforcement cannot restrain these pricing abuses, then it’s time for airline re-regulation.
(Thanks to Isabelle Gius for research assistance on this item. I will be returning to the case for airline re-regulation in a more extended piece.)
