On visiting day in the Catskills, someone waiting on line (not online) at a pizza store saw a man come in a side door and place an order.
There was already pandemonium and this was sure to set off a storm of protest.
But it didn’t. The proprietor said, “I’ll take care of it,” weighed out something in a shopping bag and gave it to the interloper. Then he looked up and saw the same question on everyone’s faces, so he explained:
“When a competitor runs out of cheese, you give it to him!”
Everyone smiled. One woman called out, “There’s no such thing as competition!”
Clearly, she was advocating a cooperative relationship — treating each other as colleagues, not competitors. This is a far cry from the insidious cooperation of businesses joining together in a cartel to snuff out smaller competitors and control prices.
In a very different kind of collaboration, airlines have come much closer to unhealthy competition. An Associated Press analysis by David Koenig and Scott Mayerowitz doesn’t call it a cartel, but it certainly is beginning to smell like one.
“The wave of consolidation that swept the U.S. airline industry has markedly reduced competition at many of the nation’s major airports, and passengers appear to be paying the price in higher fares and fees, an Associated Press analysis has found.
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.
Over the same period, domestic airfares rose faster than inflation, and analysts believe one leading factor is the decline in competitive pressure.”
The report says that at 40 of the 100 major U.S. airports, a single airline controls a majority of the market. And domestic fares climbed 5 percent over the past 10 years, after adjusting for inflation.
Of course, they point out, there are other factors affecting higher fares. These include pulling out of the recession and spikes in fuel costs. However, they say the major factor was muscling out competition. “Analysts believe consolidation freed airlines to charge more.”
Whatever the cause, we know the effect. U.S. airlines made a record $19.7 billion in profits, even though air travel hasn’t grown at the same rate as prices.
Not surprisingly, the airlines’ trade group, Airlines for America, dismisses the charges. They say the fare increases are simple supply and demand. They also justify the increases, saying that airlines have used their profits to buy new jets and update airport facilities.
They neglect to point out that the new jets are built to cram in more passengers into less space. And let’s not forget the new charges for hand luggage that suddenly became too big to fit into the reduced size overhead compartments.
So where is the government? “The Justice Department notified the four largest airlines on June 30 that it is investigating whether they are colluding to drive up fares by limiting the availability of flights and seats. Those four control more than 80 percent of the U.S. market.”
Before deregulation in 1978, fliers had even fewer choices and paid higher fares than they do now. In those days, the U.S. government controlled which airlines flew to which cities and how much they could charge. With growing competition in the 1980s, fares took a nosedive.
But then the government got into the “too big to fail” game. “After 9/11 and the recession that hit immediately afterward, major airlines were in financial shambles. Several restructured through bankruptcy, and a wave of deals starting in 2008 led to the combinations of Delta and Northwest, United and Continental, Southwest and AirTran, and American and US Airways.
“Justice Department antitrust regulators let the deals go through but forced airlines in a few cases to give up some of their spots at key airports to try to encourage competition.”
Travelers looking for those spots are hard-put to find competitive prices, though,
The old American pragmatism that disparaged ivory tower philosophy has turned into a dark alley. It has become more like the Hebrew expression kdai’ist — an opportunist who checks which way the wind is blowing rather than making a decision based on right and wrong. It’s similar to the expression Realpolitik, or practical politics — dispensing with ideology or morals for the sake of expediency.
Just like our government plays ball with dictatorships and oppressive governments, it plays ball with oppressive industries. Like airlines flying the unfriendly united skies.
So who pays the price? Consumers and passengers who get to their destinations on a wing and a prayer.