Let’s talk about competition, airlines and taxes: Part 2

Let’s talk about competition among airlines.  Has competition been damaged over the past 8 years?

Truth be told, I felt it would be when the Merger Mania started.  I really did.  I thought that choice would go down, pricing power would go way up and airlines would become even challenging to fly for even business travelers.

That really isn’t what happened.

Before I go further, let’s all acknowledge that the financial crisis, resulting recession and US economy has impacted the airline industry in the worst ways.  Airlines have been smacked around on an unprecedented level.  Remember how much fuel has risen over the past 8 years?  Milk?  Even the guy who mows your lawn?

What makes you think those rise in costs are any different for the airlines?  Even the cost to borrow money in that industry is exceptionally high relative to prime interest rates.  No one believes in the long term viability of airlines much.  So, it’s hard for you and it’s hard for the airlines and their prices may be somewhat higher but they are not double or worse.  They climbed as did most of your other costs related to transportation.  That isn’t inappropriate.

I have railed at the “lock” that American Airlines has on DFW and how much higher people in the Dallas / Fort Worth area pay for air fares to other major cities as a result.  Similar situations exist in Atlanta, Chicago, Denver, Salt Lake City, Minneapolis / St. Paul, Detroit and elsewhere.  But it has been quite bad in the DFW area for years despite the competition provided by Southwest Airlines via Love Field Airport.

That has changed dramatically now.  Airlines are now competing with American Airlines in the DFW area for the first time in decades on many routes.  There is now real choice when going to Chicago or Denver.  I can fly to Newark (NYC) for fares less than $700 for the first time in a decade.

And the same is true in other cities now.  Those cities are seeing airlines which finally have enough scale and network that they are comfortable making a play for passengers in new, non-traditional markets without just buying the customers.

Witness Delta’s recent announced intention to take the West Coast Shuttle traffic away from the incumbents (United and Southwest Airlines.)  That would never have happened even 3 years ago.

We often talk about Southwest and the Department of Justice recently referred to them as largely irrelevant in competition when they filed their lawsuit.  But wait!  Southwest is already competing strongly against airlines such as American Airlines, United Airlines and Delta Airlines in their fortress hub cities and to take them as irrelevant is just silly.

Need I remind people that Southwest has entered non-traditional markets such as New York La Guardia and Newark Liberty Airports?  Southwest *bought* its way into the Atlanta market and it gave a world class beating to Frontier in both  Milwaukee and Denver.  In fact, United got its head kicked in by SWA in Denver as well.  Continental was so afraid of Southwest that as United it went to war against them operating (potential) international flights out of Houston.

There is more high profile competition in place today than we have seen in almost 2 decades.  Let’s celebrate that for a moment because it *is* good for the consumers.

Even the casual traveler has seen new options in the form of the ULCC carriers such as Spirit and Allegiant Air.  In fact, those ULCC carriers are actually keeping LCC carriers such as Southwest (who really isn’t an LCC anymore), jetBlue and Virgin America honest.

Even I can admit that I’m wrong and I admit it.  We *do* have considerable competition today and it is more healthy competition in the right ways than in the last 30+ years.


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