Airline mergers benefit carriers and help keep fares low, study says
The nation’s airline industry has undergone so many mergers in the last decade that only four airlines and their regional carriers control more than 80% of all domestic air traffic.
Despite warnings from consumer advocates, the merger mania is having a positive effect on the industry and is partly responsible for keeping fares low, according to a new study by PwC, the auditing and consulting firm formerly known as PricewaterhouseCoopers.
The latest major airline merger was approved last month when American Airlines agreed to unite with US Airways to create the world’s largest carrier. Such unions, according to the study, have enabled airlines to eliminate unprofitable or redundant routes and invest in more fuel-efficient planes.
And when big airlines eliminate routes, low-cost carriers such as Southwest and JetBlue enter the market and force larger carriers to keep fares competitive, said Jonathan Kletzel, U.S. transportation and logistics leader for PwC.
“There have been some negative impacts on small markets but mergers have created more opportunities for low-cost carriers,” he said.
Domestic airfares increased an average of only 2% from 2004 to mid-2013 — a decrease of 0.5% when adjusted for inflation, the study found. However, the study did not calculate the added cost of baggage fees and other passenger charges — which have become a growing source of revenue for the industry.
Government statistics show that airlines also have improved their on-time arrival performance and their rate for losing or damaging luggage.
Not everyone agrees with the study’s conclusions.
“I think the study is pretty flawed,” said Diana Moss, vice president of the American Antitrust Institute, which opposed the merger of American and US Airways.
Although fares have remained stable on a national level, Moss said the study notes that prices jumped as much as 19% in some markets, despite the presence of low-cost competition.
She also fears that the consequences of the mergers have not yet been felt. “I do think we will see fare increases and further capacity cutbacks,” Moss said. “It’s going to take awhile to percolate through.”
Baggage fees the most hated airline charge
The world’s airlines collect more than $27 billion in passenger fees per year, according to one estimate, but the most hated are baggage fees.
That was the conclusion of a survey by the travel website Airfarewatchdog, which polled more than 6,100 travelers on the topic of “the Worst Major Airline Fees.”
When asked to name the fee they hate the most, 48% of website visitors named baggage fees, 38% said flight change or cancellation fees, 6% said advance seat selection fees and 5% said they hate reservation- by-phone fees.
Airlines charge $15 to $25 to check a first bag, with charges that can top $100 for oversized luggage.
“It’s the most annoying fee because most people can’t avoid them,” said George Hobica, founder of Airfarewatchdog. “A lot of people don’t have a choice about carrying a bag.”
Interest in travel to Denver gets high
Colorado became the nation’s first state to permit the sale of recreational marijuana, starting Jan. 1.
And since then, interest in travel to Denver has soared.
Coincidence? Probably not.
A data research company found that searches for airline travel deals to Denver have been outpacing searches for all other U.S. destinations, with a big surge starting Jan. 1.
The study by Hopper Research in Boston found that interest in travel to Denver climbed 6.3% above the national average in December and then jumped 14% during the first week in January. The study looked at billions of travel queries through online travel sites and bricks-and-mortar travel companies.
The interest in traveling to Colorado has been higher in some cities than others.
The biggest increase came from Nashville (63% increase), Minneapolis (58%), Detroit (53%) and Cincinnati (47%), according to the study.
Patrick Surry, Hopper’s chief data scientist, said it may not be a coincidence that some of the cities with the biggest increases in travel searches to Denver have strict drug laws.
“We can’t say the intentions of the people looking for those flights,” he said. “But this suggests that it might be a reaction to the demand” for marijuana.
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