US airlines have announced record profits – load factors are at all time highs. Fares are higher than you would think necessary with fuel prices down considerably. Consolidation has been excellent news for the US airline industry.
But what has this meant for the air traveler? It seems fair to say that what is good for an airline’s bottom line is the opposite for what is good for a passenger’s bottom.
Take a look at this chart which lists the number of flights reported by US airlines on a monthly basis from January 2010 through June 2015. The trend line tells us the big story. In summer we see more flights as one would expect and winter sees big declines. But overall flights are down. Oligopoly at work is clear to see. No wonder load factors are at all time highs.
To get an idea of what the numbers are saying look at the following table. We set 2010 as the base year. As you can see the subsequent years have typically seen a drop in number of flights. This is markedly more so from 2014 after a small growth in 2013.
The rise in 2015 caught the attention of America’s CEO who was vocal about about fighting to maintain their market share. This comment was directed at Southwest which has been taking deliveries of larger aircraft and throwing off the carefully watched market share pie. Southwest seemed to back off. We await to see what the updated data will show.
But the pie is growing, so the incentive is there to sneak in more seats and grow. The following chart shows that enplanements are rising. You are correct to note the trend line decline in flights is steeper than the trend line growth in enplanements.
The demand for air travel in the US follows an almost musical score pattern. It is highly reliable. Airlines know with great confidence what to expect every month, barring exogenous factors like storms.
So even as the airline industry touts how cheap it is to fly today compared to decades ago, know this is only one side of the story. It has never been this tight and uncomfortable. It certainly has never been this unpleasant.
Happily we know from an equally reliable economic history that oligopolies fail because its members find ways to cheat. It will happen here too.