If you're wondering why the word "collusion" is being thrown around so much these days in regard to the airline industry, think Captain Crunch. Or Fruity Pebbles. Or Cheerios.
On occasion I will accompany my wife to do the grocery shopping and I am always stunned by choice. Even something as benign as breakfast cereal blows me away.
One day I counted 62 different cereals from such brands as Kellogg's, Post, Quaker, General Mills, Kashi, Back To Nature, Ralston and at least a dozen more companies, however small they might be.
It's good to have options.
When it comes to airlines, however, few of us have those options.
It would be unfair to use the word "monopoly" when it comes to the U.S. airline industry but it's just one reason why the Department of Justice is investigating the major domestic carriers for collusion, alleging that the airlines have conspired to limit seat capacity to either maintain or drive up ticket fares. It's the oldest trick in the book of supply and demand. More supply=less demand=lower prices. Less supply=more demand=higher prices.
Now think about where we've come in the last decade. Earlier this week the Associated Press did a fascinating analysis of the industry that showed competition at the biggest airports across the country has been reduced, largely through mergers, creating a situation where passengers are paying higher fares and fees.
The AP notes that "over the past decade, mega-mergers reduced nine large U.S. airlines to four - American, United, Delta and Southwest - with the result that travelers are increasingly finding their home airport dominated by just one or two players."
Think about it. Gone are Northwest, Continental, AirTran and, come October, US Airways.
During these last 10 years, the AP reported that domestic airfares rose faster than inflation. Why?
"Airlines aren't going at each other like they used to," Mike Boyd, an aviation consultant, told the AP.
Now me, I'm lucky. Living in the Hudson Valley region of New York State, I am virtually equidistant from several major airports. I can go 35 minutes southwest and be at Stewart International Airport in Newburgh. I can go 60 minutes south and be at suburban Westchester County Airport. Tack on another 30-40 minutes and I can fly out of any of the three major New York City airports in JFK, LaGuardia and Newark. I can go 90 minutes north and avoid all the traffic and fly out of Albany. And if the price and the time were right, I would even consider driving two hours east to Bradley Airport in Hartford, Conn.
All of those give me access to myriad airline and fare options.
But most don't have those options. As per the AP analysis, a single airline controls a majority of the market at 40 of the top 100 U.S. airports. At 93 of the top 100, one or two airlines control a majority of the seats.
There are no options anymore. If you're flying out of Kansas City, you're not thinking about driving four hours to St. Louis. You're thinking which of these two airlines shall I choose? And now that it's come to this, the airlines know they have you - you're not choosing between American, Delta, United, Southwest, Northwest, Continental, US Airways and a gaggle of other airlines anymore.
In most markets, you're choosing between two. In some, there is no choice. That's one big reason why the airlines are also trying to put a stranglehold on further competition in international markets by trying to bully foreign carriers such as Norwegian Air and the three major Persian Gulf airlines.
Unfortunately, we won't be going back to the old days. Start-up and low-budget carriers can come along, like the revival of Eastern Airlines, but they're not going to make a difference.
Frankly, even if the DOJ finds the airlines were indeed in collusion, what does it really mean? A hefty fine, at best?
It's too bad, really. I rather enjoy having my choice of Frosted Flakes or Mini-Wheats or Lucky Charms or Wheaties or Raisin Bran or …
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