2 replies to this topic

[Avelo]

After several mergers between major airlines, it seems that there's less competition in the skies than before deregulation took place in 1978. Continental is now United, Northwest is now Delta, and US Airways is now American. And before that, TWA merged with American and America West merged with US Airways. Although deregulation was viewed as the key to a more liberal and competitive aviation market at its inception, that isn't really the case nowadays--instead of true competition we have an oligopoly where the strongest airlines are not only inflating airfares in their respective dominant markets but also providing inferior service with it. So is it time to have a new legacy competitor that can challenge American, Delta, and United? If so, which are the best airports that can serve as hubs?

[bAnderson]

I think that the time for another legacy carrier could potentially destroy the American market. Here's why. As of right now, all three legacy carriers are starting to figure out how to make routes more dense. One of the solutions is to completely remove the regional market, allowing for anyone who lives far away from a main airport to have to travel to a main airport to fly. Without a regional market, this will completely destroy the industry. However, this is necessary in the airline's mind because the regional market is beginning to be on the borderline of unprofitable. In the event that regional flights are completely terminated, the three major airlines and Southwest and Spirit will be competing on these routes. Add in another major FSC, we have 6 airlines competing on a route such as ORD-MSP. By increasing the competition you are spreading the profit of the route across 6 airlines instead of 5. Let's say the route provides 3000 passengers a day for an average price of $170. That's a total of $510,000 per day. That's not a lot in the first place, spread evenly we have about $100,000 per airline in the 5 config, or $85,000 per airline with 6. Another reason is that the air industry is quite expensive and possibly unprofitable. Allegiant was one of the only carriers to continually make a profit since 2008. It was only last year I believe that they went in the red for a quarter. Merges help by eliminating competition and spreading the wealth a bit better. Besides, Southwest and Spirit and Frontier and Allegiant will be there to pick up the cheaper passengers. These merges keep the industry alive, and I see another merge in the future to make a true American Airlines.

[X-Wing @Aliciousness]

After several mergers between major airlines, it seems that there's less competition in the skies than before deregulation took place in 1978. Continental is now United, Northwest is now Delta, and US Airways is now American. And before that, TWA merged with American and America West merged with US Airways. Although deregulation was viewed as the key to a more liberal and competitive aviation market at its inception, that isn't really the case nowadays--instead of true competition we have an oligopoly where the strongest airlines are not only inflating airfares in their respective dominant markets but also providing inferior service with it. So is it time to have a new legacy competitor that can challenge American, Delta, and United? If so, which are the best airports that can serve as hubs?

 

Well by definition a "new" airline would not be a legacy airline, since that term refers to airlines that existed before de-regulation.

 

You state that de-regulation was meant to increase competition and reduce prices in the aviation market; this is true and it accomplished exactly that. Airline ticket prices on average are significantly cheaper than they were 10, 20, or even 30 years ago.

 

You also mention that airlines are providing inferior service. While economy service has declined since 30 years ago, prices have also gone down to the point that an economy ticket in the late 1970s would, when adjusted for inflation, be similar or even surpass the prices airlines are charging for premium cabin tickets today. On top of this, those premium cabins today are significantly nicer than anything airlines were offering in the late 1970s.

 

It's is also worth considering the merger between American and US Airways isn't complete yet, with routes still being sorted and aircraft still being reconfigured, it's safe to say that any newcomers will be a long way out.

 

Also you should ignore what bAnderson wrote because its clear he has no idea what he's talking about. In the past several years the US carriers have been incredibly profitable, and expansion by both the legacy and low-cost carriers has meant competition has been increasing on many routes.

 

Finally, I think we're seeing trends in the US aviation markets that show a decline in flights to small airports in favor of larger airports serving multiple regions. For example, instead of sending regional subsidiaries to multiple very small airports, airlines as well as passengers have found it is more cost-effective to serve a larger airport nearby with mainline aircraft serving multiple cities, that passengers can drive to as opposed to flying from their local airport and connecting to another domestic flight. In essence, point to point air travel has led to an increase in direct flight options from medium airports, at the expense of connecting flight options from much smaller airports.