How much longer can U.S. carriers justify insane domestic prices?
Sep 17, 2017, 11:13 pm
#46
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I'm writing what follows without abbreviations / acronyms as you said they were throwing you in some cases.
There are eleven serious airlines in the US, which you would think means serious competition. But it usually doesn't.
We have only three true network airlines in the US that operate multiple hubs, service to all principal cities, plus international long-haul routes: United, Delta, and American. But even these three compete head-to-head in only a few markets. Enter a random US city pair in Kayak and you are likely to see just one or two of them offering nonstop service. Some small stations are served by only one airline exploiting a monopoly.
(Furthermore, one or another of the three network carriers have claimed most top US cities as sole-airline fortress hubs: Delta owns Minneapolis and Atlanta; American owns Philadelphia, Miami, and Phoenix; United owns Houston; etc. Nonstop fares out of fortress hubs are usually artificially high because of lack of competition.)
We have four second-tier carriers in the US -- JetBlue, strong in the northeast; Frontier, strong in Denver; Hawaiian, which has no routes within the continental US; and Alaska / Virgin America, strong in the Northwest and California. But their route maps are limited, and impact the network carriers' fares only where they overlap. If you're in Chicago, JetBlue cannot take you anywhere west of there, and Alaska cannot take you anywhere south or east of there. Frontier's system omits major cities like Boston. In fact, when you're starting from most US airports, the second-tier carriers have limited utility or are simply not there.
We have three niche airlines -- Sun Country, Allegiant, and Spirit -- that offer low base fares and limited flights in some (usually leisure or secondary) markets, although add-on fees can blunt or even erase their price advantage. If you're a businessperson, or schedule is important, these airlines are not really competitive.
Finally we have Southwest which is really none of the above. Southwest flies to fewer cities than the network carriers, sometimes at bargain rates, often more expensively, and with no first class. But it has frequent, dependable, friendly service and no small regional jets. People think Southwest is the "cheap alternative," but it's not -- not predictably so.
The US market is subdivided, geographically and by service tier, so even though there are eleven airlines "competing," chances are only two, maybe three, will have reasonable utility on any given city pair. Traveling from Charlottesville, VA to Grand Forks, ND? You have to fly Delta. From Evansville, IN to Eugene, OR? American or Delta. The second-tier carriers that hold the big guys to heel on some major routes have no effect on pricing to smaller cities like this.
THAT is where the majors make their money: shaking down hostage customers.
The General Accounting Office has found the number of competing airlines on a given route is falling steadily, especially in cities with less traffic:
http://www.gao.gov/products/GAO-14-515
It looks like collusion, and it has the practical effect of collusion, but it's just price-matching software working faster than human hands and eyes possibly could.
It's illegal for American and United to get on a WebEx call and agree to make the fare $700 on Chicago-O'Hare to New York-LaGuardia. It is perfectly legal for American's computers to observe a United fare change at 11:00:01 and make American's fares conform at 11:00:02.
There are eleven serious airlines in the US, which you would think means serious competition. But it usually doesn't.
We have only three true network airlines in the US that operate multiple hubs, service to all principal cities, plus international long-haul routes: United, Delta, and American. But even these three compete head-to-head in only a few markets. Enter a random US city pair in Kayak and you are likely to see just one or two of them offering nonstop service. Some small stations are served by only one airline exploiting a monopoly.
(Furthermore, one or another of the three network carriers have claimed most top US cities as sole-airline fortress hubs: Delta owns Minneapolis and Atlanta; American owns Philadelphia, Miami, and Phoenix; United owns Houston; etc. Nonstop fares out of fortress hubs are usually artificially high because of lack of competition.)
We have four second-tier carriers in the US -- JetBlue, strong in the northeast; Frontier, strong in Denver; Hawaiian, which has no routes within the continental US; and Alaska / Virgin America, strong in the Northwest and California. But their route maps are limited, and impact the network carriers' fares only where they overlap. If you're in Chicago, JetBlue cannot take you anywhere west of there, and Alaska cannot take you anywhere south or east of there. Frontier's system omits major cities like Boston. In fact, when you're starting from most US airports, the second-tier carriers have limited utility or are simply not there.
We have three niche airlines -- Sun Country, Allegiant, and Spirit -- that offer low base fares and limited flights in some (usually leisure or secondary) markets, although add-on fees can blunt or even erase their price advantage. If you're a businessperson, or schedule is important, these airlines are not really competitive.
Finally we have Southwest which is really none of the above. Southwest flies to fewer cities than the network carriers, sometimes at bargain rates, often more expensively, and with no first class. But it has frequent, dependable, friendly service and no small regional jets. People think Southwest is the "cheap alternative," but it's not -- not predictably so.
The US market is subdivided, geographically and by service tier, so even though there are eleven airlines "competing," chances are only two, maybe three, will have reasonable utility on any given city pair. Traveling from Charlottesville, VA to Grand Forks, ND? You have to fly Delta. From Evansville, IN to Eugene, OR? American or Delta. The second-tier carriers that hold the big guys to heel on some major routes have no effect on pricing to smaller cities like this.
THAT is where the majors make their money: shaking down hostage customers.
The General Accounting Office has found the number of competing airlines on a given route is falling steadily, especially in cities with less traffic:
http://www.gao.gov/products/GAO-14-515
It looks like collusion, and it has the practical effect of collusion, but it's just price-matching software working faster than human hands and eyes possibly could.
It's illegal for American and United to get on a WebEx call and agree to make the fare $700 on Chicago-O'Hare to New York-LaGuardia. It is perfectly legal for American's computers to observe a United fare change at 11:00:01 and make American's fares conform at 11:00:02.
Sep 17, 2017, 11:40 pm
#47
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I'm writing what follows without abbreviations / acronyms as you said they were throwing you in some cases.
There are eleven serious airlines in the US, which you would think means serious competition. But it usually doesn't.
We have only three true network airlines in the US that operate multiple hubs, service to all principal cities, plus international long-haul routes: United, Delta, and American. But even these three compete head-to-head in only a few markets. Enter a random US city pair in Kayak and you are likely to see just one or two of them offering nonstop service. Some small stations are served by only one airline exploiting a monopoly.
(Furthermore, one or another of the three network carriers have claimed most top US cities as sole-airline fortress hubs: Delta owns Minneapolis and Atlanta; American owns Philadelphia, Miami, and Phoenix; United owns Houston; etc. Nonstop fares out of fortress hubs are usually artificially high because of lack of competition.)
We have four second-tier carriers in the US -- JetBlue, strong in the northeast; Frontier, strong in Denver; Hawaiian, which has no routes within the continental US; and Alaska / Virgin America, strong in the Northwest and California. But their route maps are limited, and impact the network carriers' fares only where they overlap. If you're in Chicago, JetBlue cannot take you anywhere west of there, and Alaska cannot take you anywhere south or east of there. Frontier's system omits major cities like Boston. In fact, when you're starting from most US airports, the second-tier carriers have limited utility or are simply not there.
We have three niche airlines -- Sun Country, Allegiant, and Spirit -- that offer low base fares and limited flights in some (usually leisure or secondary) markets, although add-on fees can blunt or even erase their price advantage. If you're a businessperson, or schedule is important, these airlines are not really competitive.
Finally we have Southwest which is really none of the above. Southwest flies to fewer cities than the network carriers, sometimes at bargain rates, often more expensively, and with no first class. But it has frequent, dependable, friendly service and no small regional jets. People think Southwest is the "cheap alternative," but it's not -- not predictably so.
The US market is subdivided, geographically and by service tier, so even though there are eleven airlines "competing," chances are only two, maybe three, will have reasonable utility on any given city pair. Traveling from Charlottesville, VA to Grand Forks, ND? You have to fly Delta. From Evansville, IN to Eugene, OR? American or Delta. The second-tier carriers that hold the big guys to heel on some major routes have no effect on pricing to smaller cities like this.
THAT is where the majors make their money: shaking down hostage customers.
The General Accounting Office has found the number of competing airlines on a given route is falling steadily, especially in cities with less traffic:
http://www.gao.gov/products/GAO-14-515
It looks like collusion, and it has the practical effect of collusion, but it's just price-matching software working faster than human hands and eyes possibly could.
It's illegal for American and United to get on a WebEx call and agree to make the fare $700 on Chicago-O'Hare to New York-LaGuardia. It is perfectly legal for American's computers to observe a United fare change at 11:00:01 and make American's fares conform at 11:00:02.
There are eleven serious airlines in the US, which you would think means serious competition. But it usually doesn't.
We have only three true network airlines in the US that operate multiple hubs, service to all principal cities, plus international long-haul routes: United, Delta, and American. But even these three compete head-to-head in only a few markets. Enter a random US city pair in Kayak and you are likely to see just one or two of them offering nonstop service. Some small stations are served by only one airline exploiting a monopoly.
(Furthermore, one or another of the three network carriers have claimed most top US cities as sole-airline fortress hubs: Delta owns Minneapolis and Atlanta; American owns Philadelphia, Miami, and Phoenix; United owns Houston; etc. Nonstop fares out of fortress hubs are usually artificially high because of lack of competition.)
We have four second-tier carriers in the US -- JetBlue, strong in the northeast; Frontier, strong in Denver; Hawaiian, which has no routes within the continental US; and Alaska / Virgin America, strong in the Northwest and California. But their route maps are limited, and impact the network carriers' fares only where they overlap. If you're in Chicago, JetBlue cannot take you anywhere west of there, and Alaska cannot take you anywhere south or east of there. Frontier's system omits major cities like Boston. In fact, when you're starting from most US airports, the second-tier carriers have limited utility or are simply not there.
We have three niche airlines -- Sun Country, Allegiant, and Spirit -- that offer low base fares and limited flights in some (usually leisure or secondary) markets, although add-on fees can blunt or even erase their price advantage. If you're a businessperson, or schedule is important, these airlines are not really competitive.
Finally we have Southwest which is really none of the above. Southwest flies to fewer cities than the network carriers, sometimes at bargain rates, often more expensively, and with no first class. But it has frequent, dependable, friendly service and no small regional jets. People think Southwest is the "cheap alternative," but it's not -- not predictably so.
The US market is subdivided, geographically and by service tier, so even though there are eleven airlines "competing," chances are only two, maybe three, will have reasonable utility on any given city pair. Traveling from Charlottesville, VA to Grand Forks, ND? You have to fly Delta. From Evansville, IN to Eugene, OR? American or Delta. The second-tier carriers that hold the big guys to heel on some major routes have no effect on pricing to smaller cities like this.
THAT is where the majors make their money: shaking down hostage customers.
The General Accounting Office has found the number of competing airlines on a given route is falling steadily, especially in cities with less traffic:
http://www.gao.gov/products/GAO-14-515
It looks like collusion, and it has the practical effect of collusion, but it's just price-matching software working faster than human hands and eyes possibly could.
It's illegal for American and United to get on a WebEx call and agree to make the fare $700 on Chicago-O'Hare to New York-LaGuardia. It is perfectly legal for American's computers to observe a United fare change at 11:00:01 and make American's fares conform at 11:00:02.
Those kinds of practices will make a person a cynic in no time, and over the years I and others have called some out for naivete here when an airline announces it wants to do something for X reason and some here are dumb enough to take that at face value.
Remember how they got their nose in the tent on the baggage fees? By playing passengers off against each other and saying they're charging for a SECOND bag because only a minority of overpackers are costing the rest more money in higher airfares.
Some of us knew that that wasn't the real agenda and it was the start of a slippery slope and we were right.That kind of thing has been constant over the years, but things are worse for many places now thanks to being down to just 3 big legacies and competition being worse, with smaller markets really taking it on the chin.
Here in ATL, for example, we're relatively lucky to have ULCC presence as well as WN (which has been disappointing compared to past performance). But smaller airports across the southeast region like CAE, GSP, BHM, CHA and numerous others get jungle jets and sky-high fares from legacies (if anything at all) and crumbs from ULCCs. You can see the result in the massive number of parking spaces that continue to be added for the airport or private lots around ATL...many of those are for people driving longer distances because of the fare gaps and not having much cheap going out of smaller airports ('cept maybe Allegiant to Florida). It used to be that I would drive occasionally to places like BHM or GSP because they had a lower fare or better mileage situation, but I haven't done that in years. The smaller places and even some of a fair size, like MEM and CVG, have been the losers in the consolidations. I would bet there have been many more losers than winners.
Sep 18, 2017, 8:41 am
#48
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We have four second-tier carriers in the US -- JetBlue, strong in the northeast; Frontier, strong in Denver; Hawaiian, which has no routes within the continental US; and Alaska / Virgin America, strong in the Northwest and California. But their route maps are limited, and impact the network carriers' fares only where they overlap. If you're in Chicago, JetBlue cannot take you anywhere west of there, and Alaska cannot take you anywhere south or east of there. Frontier's system omits major cities like Boston. In fact, when you're starting from most US airports, the second-tier carriers have limited utility or are simply not there.
We have three niche airlines -- Sun Country, Allegiant, and Spirit -- that offer low base fares and limited flights in some (usually leisure or secondary) markets, although add-on fees can blunt or even erase their price advantage. If you're a businessperson, or schedule is important, these airlines are not really competitive.
We have three niche airlines -- Sun Country, Allegiant, and Spirit -- that offer low base fares and limited flights in some (usually leisure or secondary) markets, although add-on fees can blunt or even erase their price advantage. If you're a businessperson, or schedule is important, these airlines are not really competitive.
Sep 19, 2017, 1:56 am
#50
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Interesting analysis. Let's hope something changes for the better. It is interesting that in Europe, small regional airports are often or mostly only catered to by Low Cost Carriers where in the US it seems to be the opposite, low cost carriers only fly from major airports and smaller regional airports are operated by one of the top 3 carriers.
Sep 19, 2017, 6:24 am
#51
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2-3 weeks of paid vacation, low gas prices for automobiles, lower population concentration levels at origin and/or destination, worse public transport, and greater financial worries over student debt/education costs, retirement costs, health costs and so on -- all of that make air travel markets quite different on the demand side.
Sep 19, 2017, 6:29 am
#52
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But all those trains in Europe didn't kill off European LCCs; nor did these trains kill of European legacy majors, even as trains do provide some limited competition to air travel (just not as much competition as many train advocates may like to believe).
Sep 19, 2017, 8:15 am
#53
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Perhaps a silly question, but we're at a point now where most trans-Atlantic trips from major U.S. cities -- purchased with a bit of foresight -- are under $500 RT. You can even fly from crazy places like Providence to Edinburgh, Scotland one-way for $109 with little advance planning.
Most west coast flights to LHR etc are $1500-$1800 advance purchase coach.
From PHX I pay that regularly.
Sep 20, 2017, 7:13 am
#54
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Sep 20, 2017, 7:28 am
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Perhaps I misunderstood. Sorry if I did. Here's what you said:
The plain English meaning of that sentence is that international flights have benefits which are not ordinarily available on domestic flights, such as ... cargo.
Again, I apologize if I misunderstood. What did you mean?
Again, I apologize if I misunderstood. What did you mean?
Sep 20, 2017, 7:34 am
#56
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Perhaps I misunderstood. Sorry if I did. Here's what you said:The plain English meaning of that sentence is that international flights have benefits which are not ordinarily available on domestic flights, such as ... cargo.
Again, I apologize if I misunderstood. What did you mean?
Again, I apologize if I misunderstood. What did you mean?
Sep 20, 2017, 8:32 am
#58
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Sep 20, 2017, 9:24 am
#59
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BTW, I like your signature. I got SSSS in Doha yesterday, I assume because I'm staying in the U.S. for only about 26 hours before returning. Given the already comprehensive security checks for U.S. destinations, all the SSSS means ex-DOH is that all of your carry-on possessions and the clothes you are wearing are swabbed for explosive residue.
Sep 20, 2017, 11:33 am
#60
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Wow, we're mixing up about 5 different concepts in this thread.
- The $109 fare to Edinburgh (or wherever) is *very* limited, just a few seats per flight on ULCCs. I've actually been tempted enough to look at Wow and Norwegian on a couple different routes, and you most often see $400-500 R/T *without* any add-ons. I've already booked a couple family trips for 2018 - ones where we thought "maybe we'll buy those super-cheap tickets and connect in Iceland" - and AA has yielded the better overall value each time.
- If I'm dropping $1500-1800 (or $3k-4k for J) to get to Europe, it's almost certainly because I need to be there for a semi-important meeting. The most important thing I'm buying is reliability - I know AA/BA have other options to get me to LHR than the flight I'm booked on. I'm not trusting Wow or Norwegian on a trip like this, even taking reasonable precautions (like flying in the day prior to the meeting). A lot of Norwegian routes are 2x-3x per week, and if they cancel they aren't putting you on BA. I'm sure someday I will fly a long-haul ULCC somewhere, but it'll be a trip where I don't particularly care if I get there 3 days late.
- None of this has anything to do with domestic fares. I book a lot of my business trips with 3 to 7 days notice. When I fly a competitive route, I'm often surprised at how cheap it is compared to 10-20 years ago. When I fly a route with only one option, it's the opposite story...but those existed 10-20 years ago as well. A few of my routes have recently added a ULCC, and it varies as to whether the major carrier pays attention to it. (LAX seems to be a yes, DTW no.)
- The $109 fare to Edinburgh (or wherever) is *very* limited, just a few seats per flight on ULCCs. I've actually been tempted enough to look at Wow and Norwegian on a couple different routes, and you most often see $400-500 R/T *without* any add-ons. I've already booked a couple family trips for 2018 - ones where we thought "maybe we'll buy those super-cheap tickets and connect in Iceland" - and AA has yielded the better overall value each time.
- If I'm dropping $1500-1800 (or $3k-4k for J) to get to Europe, it's almost certainly because I need to be there for a semi-important meeting. The most important thing I'm buying is reliability - I know AA/BA have other options to get me to LHR than the flight I'm booked on. I'm not trusting Wow or Norwegian on a trip like this, even taking reasonable precautions (like flying in the day prior to the meeting). A lot of Norwegian routes are 2x-3x per week, and if they cancel they aren't putting you on BA. I'm sure someday I will fly a long-haul ULCC somewhere, but it'll be a trip where I don't particularly care if I get there 3 days late.
- None of this has anything to do with domestic fares. I book a lot of my business trips with 3 to 7 days notice. When I fly a competitive route, I'm often surprised at how cheap it is compared to 10-20 years ago. When I fly a route with only one option, it's the opposite story...but those existed 10-20 years ago as well. A few of my routes have recently added a ULCC, and it varies as to whether the major carrier pays attention to it. (LAX seems to be a yes, DTW no.)