Fanjet

And? I've noticed lots of things being more than 5-6% expensive than they were a few years ago. Are airfares never expected to rise while everything else does?

AA_EXP09

From last year

nkedel

Oil prices have been subject to major fluctuations over the course of the year for the last 3 years, with the maximum and minimum spots on the range not changing much (and the highs are still well below the 2008 peaks.)

2009 was much lower, 2010 somewhat so, but that was before the economy (both US and World) had recovered much.

Inflation in general has been low, but far from nonexistant; we haven't had a 5% year (quite) at least since 2000 (eta: 1990). Going monthly, July or Aug 2007 to the same month in 2008 right before the bubble started to burst might just get there, but looking at the BLS data it looks like it just misses the 5% mark.

The 2013 Social Security COLA (based on the 2012 CPI change) was 1.7%

eta: ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt for those interested in interpreting their own numbers.

PWMTrav

If airfares were bound to the economy as you suggest, they shouldn't be 5-6% higher this year from last. Oil has been volatile, but basically flat year over year. Inflation itself remains low.

Airfares are up 5-6% because capacity either isn't growing or is being cut, not sure which, while a few more people happen to be flying. Consolidating major airlines isn't going to make that any better.

dcpatti

That 5-6% isn't bad, but look at a city pair like DCA-MCO which has gone up a consistent 40% since Air Tran left the route. US, DL, and B6 all remain on this route, yet what used to be a consistent $170-or-less round trip is now rarely below $210 and usually closer to $240.

Fanjet

If the economy is getting better, that means more people flying. Housing prices are up way over the rate of inflation from a year ago as well. Airlines have learned how to manage their capacity much better than in the past. When oil is trading under $20 per barrel, you can have a lot of planes and fly them everywhere. When it's trading at 5 or 6X that amount, you can't. Keeping US and AA as separate airlines isn't going to change that practice.

PWMTrav

We're not making a different argument, really. I'm just saying that keeping AA and US separate will keep more seats open on the market than consolidation would.

In any industry, there's pretty much nothing in it for the consumer to allow 4 oligopolists to consolidate into 3. In this particular industry, it's even worse because the barriers to entry are so high. To ease fares, we're essentially pulling for airlines like AS, B6 and WN to add capacity by competing on busy routes. Even if that happens, it does little for hub captives and next to nothing for people way outside of a major city.

Fanjet

But this isn't 4 oligopolists merging into 3. The notion of US currently being an oligopic carrier is a stretch by any means. And WN is very much an equal player in this game. The DOJ likes to exclude them at every turn, like saying "3 Mega carriers plus WN". But WN sells tickets and transports people just as much as the Big 3. The number of large airports where WN is the dominant carrier, if not the majority carrier, is quite long.

jcrb

gaad ane!

Granitebox

I have seen nothing firm after the late July announcements of leaving *. There was chatter in mid-August that the plans would be changed as a result of the DOJ rulings but nothing has been reported. Perhaps they are waiting on the appeal rather than go out/in/out....

nova08

Until there is a ruling I doubt we will receive any formal announcements. One can hope US is working on Plan B, C, D, etc. but I don't think they are going to come out and say "If the merger does not happen US will join OW on XYZ" When they are fighting hard to get the merger approved.

I for one hope US has a plan B for their wide body fleet.

PWMTrav

Fair enough. I just looked at the numbers and you're right. This merger would moreso create 4 dominant "national" carriers, rather than consolidate 4 dominant players into 3. WN is actually pretty damn far up the list, and US is weaker than I had remembered.

FWAAA

The complaint contains quotes from US execs to the effect that it doesn't view WN as a primary competitor - so if US doesn't view WN as the competition, who are we to argue otherwise?

Of course WN is part of the competition. Right now there are four very big legacies, some bigger than others (UA, DL, AA and US) plus WN, a very big airline. Only the legacies cater to those who want air service to/from smaller communites (ignored by WN) and only the legacies offer true premium seats and service on any wide scale (VX notwithstanding).

No matter how you slice it, this merger is about reducing the number of big domestic airlines from five to four.

Azzuristar

The one thing that will get to everyone is when WN eventually acquires F9 or B6. That is when it will hit the fan.

(I feel so cool using all the IATA names)

dangw20

I would argue that US definitely shows oligopic tendencies. The DOJ cited their CEO emailing a competitors CEO to get them to stop running a certain miles promotion.

I do agree that WN is a major player. They aren't as a direct competitor as the legacies but they all fly planes from point A to point B. But no matter what you call WN, the merger removes yet another competitor and makes it even easier to collude (directly and indirectly) on prices and fees.