Show Your Airline Some Love

Recent Megamergers and International Alliances Have Made Flying Cheaper, More Efficient, and Better Than Ever Before

Flying to Arizona on the eve of the recent holiday was a delight: crammed terminals, crammed security lines, crammed overheads, crammed runways, and harried airline employees imploring passengers to consider prolonging their odyssey by taking a later flight for a $150 voucher. As it happened, I was able to enjoy the pleasure of Chicago O’Hare for a few additional hours, minus the compensation; something about aircraft door trouble.

On days like that, strained airlines make cable companies and tax-collecting agencies seem like beloved American institutions. There is no fury like that of a trapped passenger, and I found myself contributing to the chorus of grumbled expletives, acting out as if my fundamental human rights had been violated by the world’s most sinister cabal. It definitely didn’t get me to my destination any sooner, but somehow it made me feel less powerless.

The funny thing is, when I am not being delayed by doors that refuse to shut properly (couldn’t we have simply taken turns holding onto it?), or by weather, or by runway congestion, I am quick to defend the maligned airline industry, which last year boarded and flew more than 800 million passengers from U.S. airports. Actually, even when I am grumbling, I never succumb to the seductive nostalgia for a fictional past when flying was better. Warts and all, this is the golden age of flight.

The first thing to understand when it comes to airlines is that bigger is in fact better. An airline is only as good as its reach and its ability to distribute passengers and costs across its network. It’s been fashionable to knock the airline consolidation of recent years. But four formidable network carriers with over 80 percent of the market can get you almost anywhere—and provide a more competitive, more pro-consumer landscape than nine large-ish carriers with coverage gaps and dominant positions in certain regions. Megamergers also have allowed different types of airlines like JetBlue, Virgin America, and Southwest (one of the four giants now, but a different beast from the other three) to flourish.

The federal government’s initial opposition to the latest big merger, of American and US Airways last year, was driven more by politics than substance. A settlement forced the airlines to free up some gates to competitors at congested Northeast airports (which should have always been part of the deal, and was far from being the government’s main initial concern). In the end, the Justice Department was forced to do an abrupt about-face and throw in the towel rather than face the airlines in court.

Airline mergers are good for consumers. Contrary to popular belief, the consolidation of the industry has not led to dramatically higher fares. A recent PricewaterhouseCoopers analysis found that average domestic airfares have risen at a rate of approximately 2 percent a year since 2004, lagging behind not only inflation, but also behind the airlines’ twin costs of labor and fuel, which have soared in this period. And even when you factor in all the additional fees these days, airfares on average are still less than half of what they were on the eve of the industry’s deregulation in the late 1970s—back when bureaucrats in Washington determined how many thousands of dollars airlines had to charge to fly passengers from one coast to another, and barred any new entrant from trying to do it for less. It’s no wonder the airline lobby has a nifty graphic on its website comparing airfare inflation over time with the rise in cost for education, NFL tickets, gasoline, and even postage stamps. It also has graphics decrying how much of your ticket price—more than 20 percent on a $300 fare—amounts to baked-in federal taxes.

Besides sparing passengers from dramatic fare increases, airlines have also improved on measures like delays and baggage handling. And, while there’s no direct non-stop flight from Washington Dulles to Tucson or Albuquerque, the scale of the three dominant network carriers—Delta, United, and American—means they can all offer me many options for a seamless trip connecting at their various hubs, and will compete vigorously for me to opt onto their network.

The airlines are benefiting, too. After years of being broke, they’re making money and spending tens of billions of dollars on new aircraft and terminals.

The good news nowadays is that the same economic logic—the advantage of expanded, competing networks—is starting to take hold in the global marketplace. Antiquated, protectionist regulations in many countries (including U.S. laws barring outright foreign ownership of airlines here) have stymied the creation of truly global airlines. But the development over the past two decades of ever more integrated alliances is offering the same win-win dynamic we’ve experienced domestically.

These alliances—Star (anchored by United), Sky (Delta), and oneworld (American)—allow airlines to sell seats on code-share partners, share terminal infrastructure, and collaborate on schedules and amenities like frequent flyer miles.

There are no direct non-stop flights from Washington to Hamburg or Krakow, but Star, Sky, and oneworld will offer me plenty of seamless one-stop options for getting there on their networks. I tend to fly United, and its close partnership with Lufthansa means I can choose from far more daily transatlantic choices on “my airline,” getting or redeeming miles. But if United and Lufthansa were ever tempted to jack up fares too high, Sky would be happy to get me to Hamburg or Krakow via its Amsterdam or Paris hubs, and oneworld would be happy to do so via London.

The creation of these larger global carriers (OK, “alliances”) are a market fix to a balkanized regulatory landscape. Launched as somewhat limited partnerships in the 1990s, the three alliances are increasingly acting like integrated carriers, and branding themselves as such. It’s not uncommon now to see aircraft painted in the colors and logo (the “livery,” in airline-speak) of the alliance as opposed to the individual airline, and London Heathrow’s new multi-billion-dollar Terminal 2 is being marketed explicitly as the terminal for Star’s 23 airlines, meaning that at the world’s busiest airport in terms of international traffic, United, Lufthansa, and Singapore airlines can essentially act as one airline.

Flying over time also has become far safer, which is yet another reason why our commercial aviation system should be appreciated, and not maligned, though of course I don’t expect that to happen. We may be paying a lot less than we once did to get to our destinations, and for the most part we get there far more efficiently than we ever did before, but human nature dictates that the expletives will fly when you’re crammed into a long narrow tube with hundreds of others and something goes awry—like the door refusing to shut properly on your way to Arizona.


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