Travel Insights: Just How Healthy Are the Airlines?
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Last week Airlines for America (A4A), the lobbying group for nearly every major U.S. airline, projected spring 2015 air travel would rise to its highest level in seven years, with passenger volumes expected to fall just below the 2007 peak. Roughly 134.8 million passengers are expected to fly on U.S. airlines during March and April compared to 132.2 million passengers in 2014, including a record 17.2 million travelers on international flights.
Indeed, to accommodate the expected growth in demand, A4A said airlines are increasing the number of seats by 3 percent or 64,000 seats per day during this period. It also attributed the increase to rising U.S. employment and personal incomes, an improving economy, and strong optimism among consumers, as well as "the continued affordability” of air travel.
A4A also reported that the 10 publicly traded U.S. airlines collectively recorded a net profit of $7.3 billion in 2014. At the same time, these airlines reduced debt, invested in their workforces, renewed their fleets, and met customer demand by offering new and improved products and additional destinations and seats.
Sounds good both for airline travel and travel in general, right? But not everybody sees it that way. In a strong statement, U.S. Travel Association President Roger Dow said that while his group welcomes the projected increase in travel demand, it doesn't mean that the airlines are necessarily doing a “good or even a humane job.”
"My question for the Big Three airlines is: how do we make sure that capacity keeps up with demand?" Dow said. "Every piece of evidence we have shows that our infrastructure is already straining under the current load, and that passengers are frustrated beyond words by overcrowded flights and delays in the terminal, and on the tarmac. We also know consumers are traveling less than they otherwise would because of these problems. Where are the Big Three's solutions?"
Dow said the travel community has urged the industry to work together to modernize and expand the air travel system in order to maximize efficiency and let new airlines into the marketplace. "We congratulate our friends the airlines for their increasingly robust revenue reports—we all want our carriers to be healthy and profitable," he said. "However, we're alarmed that the Big Three seem determined to stamp out competition and cling to the status quo, which fundamentally harms the consumer, particularly as demand grows."
Good for you, Roger, to point out how an oligopoly of airlines is decreasing competition in the market. We indeed now have just three major airlines (American, Delta and United) and four if you include Southwest. Sure there are other carriers like JetBlue, Alaska, and Virgin America, but the choices that consumers have in the market are increasingly limited. That has led to major reductions in capacity in certain markets, despite the airlines' vow to increase seats this spring.
It also has led to higher fares, again despite the airlines' claim about the "affordability" of air travel today. Indeed, every time I try to book a domestic flight it seems to be about $50 to $100 more than I remember paying for the same flight a year ago. And that's not counting all the ancillary fees we now have to pay for baggage, seat assignments, early boarding, and more.
So I guess the health of the airline system is in the eye of the beholder here. The major domestic airlines say things are much better. My question is, do their passengers feel the same way?
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