04/14/2017

Don’t Break Up The Airlines. Bring More In

James Pethokoukis, American Enterprise Institute

Viral video of a United Airlines passenger being dragged from a plane would seem to be prima facieevidence that the U.S. airline industry — and maybe corporate America more broadly — has a competition problem.

Let’s say, for instance, you’re so outraged by the incident that you vow to never fly United again. It would be a difficult promise to keep. As The Washington Post notes, United has roughly 50 percent market share in Houston and Newark, and around 30-40 percent in other major hubs like Dulles Washington, D.C., San Francisco, Denver, and Chicago O’Hare.

See, domestic U.S. flyers just don’t have a lot of options, at least not as many as they used to. Mergers over the past decade have turned the biggest nine airlines into just four even-bigger airlines: American, United, Delta, and Southwest. Those four carriers now control more than 80 percent of the U.S. market. Or to slice the numbers another way: Today, one or two airlines control a majority of the seats at 93 of the 100 largest airports, according to a 2015 Associated Press analysis. A decade ago, that number was only 78. And if you restrict the study further, you find that a singleairline controls a majority of seats in 40 of the top 100 markets vs. 34 a decade earlier.

Which seemingly leads to a simple explanation for why United didn’t make a better effort to avoid an ugly confrontation: They didn’t have to, so they didn’t bother. So bring on the extreme re-accomodation! Or as a Fusionheadline put it, “Airlines can treat you like garbage because they are an oligopoly.”

Well, if the problem is too few airlines competing for passenger business, then one obvious solution is to bust them up. Indeed, some critics — mostly on the left — were advocating a breakup even before the disturbing video surfaced. They saw, for example, last summer’s big computer malfunction at Delta as another example of airline oligopoly leading to poor service. With little competitive threat these days, there’s no need to spend big bucks on updating IT systems. As David Dayen wrote at The Fiscal Times: “We actually have a choice here, rooted in antitrust laws a century old designed to preserve competition and break up monopolies.”

But, of course, this isn’t a monopoly situation. To flip the numbers around, most large cities aren’t dominated by a single carrier. So there is some competition. (And a recent Justice Department investigation failed to find evidence of collusion among the carriers.)

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