Bad News for Fliers This Fall

Expect high fares and scarce seats, despite U.S. push for competition. Plus a map of the hardest-hit American airports

  • Share
  • Read Later

Correction appended: Sept. 1, 2013, 11:55 p.m. E.T.

The Department of Justice’s somewhat surprising lawsuit to stop the merger of American Airlines with US Airways may not offer much help for passengers hoping that competition among the majors will keep a ceiling on airfares. Like any commodity, airfares are a function of supply and demand — and carriers have been removing supply from the market. Some 13 million departing seats have been vanished from the system in the past year, according to Aviation DataMiner.

It’s crowded up there, and it’s going to stay that way.

Which is to say, don’t expect much in the way of bargains over the next peak period, the Thanksgiving holiday. “Fares will be up slightly, but not a lot,” says George Hobica, president of Airfarewatchdog.com. His advice is to keep checking on prices until you see one you like. Conversely, if you have the travel bug, one of the cheaper times to fly is right about now: September is a slow period of the airlines.

The airline industry has made a round trip. As Oliver Wyman aviation expert Blair Pomeroy notes, the legacy carriers that have already merged — United and Continental and Delta and Northwest — now hold market share close to what the majors had 20 years ago. US Airways’ 8.3% share, whether it’s part of a merged American or not, didn’t seem likely to do much to change the competitive set, according to most analysts. And it would save the combined companies $1.4 billion in costs, as the two companies touted in their merger announcement. But DOJ’s analysis of ticket data also showed that combining the two would effectively remove one competitor from the market in 1,665 city or airport pairs. That was one too many as far as the government was concerned.

Perversely, DOJ’s case to preserve competition could conceivably reduce it in some areas. So fares might actually increase for fliers in places such as Charlotte, N.C., or Washington Reagan if the merged airline has to give up precious slots to get the deal done. At slot-restricted airports like Reagan, you can’t simply add flights or airlines.

Not unreasonably, DOJ is worried that the newly combined carrier, which would operate as American Airlines, would have about 70% of the takeoff and landing slots at Reagan. That’s lots of slots, but as the Aspire Aviation consultancy points out, when you look at the three-airport Washington, D.C., market that includes Dulles and Baltimore-Washington International, the dominance isn’t as great. People will still have options. Yet if US/AA is forced to give up slots, it will be smaller cities like Akron, Ohio, or Savannah, Ga., that will likely suffer, as the carriers that both gain and lose must focus assets on their more productive routes. Similarly, if US/AA has to give up slots in the current US Airways fortress of Charlotte, do you think it’s going to give up a flight to Dallas or one to Fort Walton Beach, Fla.?

Without a merger, analysts have pointed out that a postbankruptcy, standalone American Airlines is going to be a trimmed-down version of its earlier self. According to Helane Becker of Cowen & Co., American “would need to address its issues on the standalone basis, likely through capacity and head-count reductions. AMR [America’s parent company] needs to address its operations in LA and the overall network, which would result in capacity reductions and higher ticket fares.” That’s good for stockholders but not necessarily passengers.

So this much is true: airlines are lushly profitable right now and it’s a status they haven’t enjoyed in, oh, forever. Only a surge in capacity — new flights — can alter that scenario. Don’t expect it anytime soon, whatever the trustbusters do.

An earlier version of this article misstated the name of George Hobica’s website. It is Airfarewatchdog.com, not Airlinewatchdog.com.

23 comments
steve222
steve222

i will not be treated like a criminal and will continue to avoid flying at all costs. driving and taking the train are so much better!

davecu41
davecu41

Discretionary air travel may be down due to the unpleasantness of flying.

The screenings, the new pricing for services as well as the usual inconveniences are a choice I will not make soon.

Buses and trains are a economical, comfortable alternatives. I'm not going to pay more for more hassles.

Leftcoastrocky
Leftcoastrocky

Time for a significant investment in high speed rail

JosephBagadoughnutz
JosephBagadoughnutz

amtrak is awesome.  no tsa, walk around all you want, and they have a bar.  (little plastic bottles are best)

Goldielover
Goldielover

For the most part, I've given up on flying altogether.  They've gotten more and more expensive, the seats smaller and smaller, and they charge additional for every little extra they can possibly think of.  I'm retired now, and have the time to take the train instead.  About the only thing that would tempt me back on a plane would be an overseas destination. 

DeweySayenoff
DeweySayenoff

My rule of thumb is that if you can drive to it in eight hours, don't bother flying.  If you consider the check-in process is two to two and a half hours, the flight virtually always includes a layover several hundred miles out of your way (Thanks UPS for setting the standard for "shipping" people!) that lasts another hour or two, flight time for both flights (assuming you only have ONE layover) then the wait for the baggage and the line at the car rental and you've already blown seven to eight hours of your life to get there, and you were treated like criminal cattle at best to boot.

Nowadays, if I can drive it in one day (straight through non-stop for up to 16 hours), I don't fly.  I may be a little sore when I get there, but I won't arrive wishing extinction on my fellow man and I'll have my car and "stuff" with me.  You can't get that with air travel anymore.

TrawickMaria
TrawickMaria

@TIME @APPropst As the quantity supplied falls, demand will rise in time for Thanksgiving and Christmas. Purposeful?

wallynm1
wallynm1

We never fly unless absolutely necessary. Airlines are worse than ridding the bus and in some cases slower

KBorenzweig
KBorenzweig

@TIME: Bad news, air travelers: This fall, you can expect high fares and scarce seats | ti.me/14PG9r2” and many delays of course!

mandycat
mandycat

Want to know how old I am?  I'm so old I can remember when flying on U.S. airlines was actually enjoyable and even a bit glamorous.  And contrary to popular mythology, airline tickets before deregulation were not unaffordable for most of us.  In 1969 I was earning not much more than minimum wage and managed to do some pretty fancy traveling, around the world in fact.

So perhaps someone more knowledgeable about airline economics can explain to me why re-regulating the airline industry would be a bad thing now?  It would be politically impossible, I understand that.  But why would be it be a bad thing for customers?

seemelreed
seemelreed

@TIME With such an erratic undulation in the Jet stream, there will undoubtedly be big delays throughout the winter and well into spring.

IVIGJB
IVIGJB

@TIME It may be cheaper to fly on a private plane !

ThomasMick
ThomasMick

@slone @TIME Seems someone is limiting travel for Americans... can't having too many of us moving about; moving targets are hard to hit.

NewsLaffs
NewsLaffs

@TIME Airline seats closer together? Awesome! I love unavoidable gropes. It's the only way I can get off, anymore.

margarita626
margarita626

@lele44094 flying is such a joke now. Remember when it was affordable to go on a family vacation??? Thxs for the soda & chips, ur too kind!

jesus_siancas
jesus_siancas

@TIME Preocupa pocas Inversiones en Lineas Aéreas a Nivel Internacional. es competitivo Servicios o Producción de Servicios. Que pasa aquí??

mspretty7159
mspretty7159

@TIME Lol they will always pay for the best seat without question!!! American Made

APPropst
APPropst

@TrawickMaria @TIME not sure what you are asking. Supply has shifted due to less flight and demand increases as well over the holidays.

lele44094
lele44094

@margarita626 it sucks. Does anyone still give "free" snacks besides southwest? United sure doesn't. They really suck.

margarita626
margarita626

@lele44094 jet blue does and they give u the first bag for free!!! I used to LOVE Continental but they were ruined w/the United takeover!

lele44094
lele44094

@margarita626 totally! United is awful but its what I fly the most because they have direct to CLE.