How Airline Mergers and Deregulation Hurt Travel

It seems America has forgotten that air travel is supposed to serve the public.
April 2015
(Flickr/Corey Seeman)
Alex Marshall
By Alex Marshall  |  Columnist
An urban affairs and infrastructure columnist for Governing

You can dip your toe into a river free of charge. Same with an ocean. It’s pretty clear that rivers and oceans are public. Private companies use them, but they don’t own them. Government ensures open access to them via a public boat dock or a beach.

The same goes for most roads. With the exception of the occasional private turnpike, government builds roads and opens them to everyone. But what about the sky? Who owns the sky?

As I understand the legal principle, the sky is open to everyone, though there are rules for its use. Nevertheless, we’ve allowed many of our cities, towns and, most important, their inhabitants to get into a situation where access to the air is controlled by just one or two gatekeepers, called airlines.

Opportunities for this sort of monopoly have grown because in the last generation dozens of airlines have disappeared. Some have gone bankrupt, unable to make a profit in the chaos unleashed by deregulation. Others have merged. We are left now with only four major airlines -- American, Delta, Southwest and United -- controlling a reported 85 percent of U.S. flights.

On a national level, the latest round of mergers has meant fewer flights with higher prices and more restrictions and fees. But on the level of individual cities and regions, this dynamic is far worse. There, airlines are throttling travel into and out of cities large and small.

Last summer I traveled from New York City to the small Minnesota city of International Falls, up on the Canadian border. International Falls is about 300 miles and five highway hours away from Minneapolis, so flying there is the preferred option. But with Delta having bought out Northwest in 2008 there are few daily flights. This is true even though Delta is receiving subsidies for its flights to International Falls under the federal Essential Air Service program. Delta applied for subsidies in 2009. Funny, the subsidies were not needed before the merger.

I ended up renting a car in Minneapolis and driving. That’s an inefficient outcome both economically and environmentally.

I used more gas to move my 200 pounds of flesh inside several thousand pounds of metal than I would have filling one more seat in an airplane. I also spewed more carbon into the air.

It’s not just tiny cities where this is happening. In 2010, the Justice Department allowed United to merge with Continental. Now United controls a huge portion of flights going in and out of Newark’s airport, one of the big three in the New York metropolitan area. It’s no surprise that fares have gone up and service has declined.

This is a capricious and unpredictable environment for the infrastructure investment decisions that cities and regions have to make. This January, Charlotte, N.C., announced that it was building a fourth runway and related expansions at its airport at a cost of $100 million. The talk online was about whether this would turn Charlotte into “another St. Louis.” That city tore down homes to build a third runway, at a cost of a billion dollars, only to have American Airlines abandon St. Louis as a hub after its merger with struggling TWA in 2001. American, which merged with US Airways in 2013, still uses Charlotte as a major hub, but this could change at any time, leaving the city with expensive concrete on its hands.

When did we forget that air travel is supposed to serve the public, which collectively owns the sky, builds the airports and runways and, through the federal government, runs the air traffic control systems that make it all safe and workable?

We’re also forgetting that transportation is a system, a network. Sure, it’s cheaper per person to fly 300 people from Denver to Chicago than to fly 30 people from Chicago to, say, Des Moines. But a network has greater value if it’s a large one. We don’t tear up roads to smaller towns and cities because not enough people use them. We intuitively understand that a road system has greater value for everyone when they can reach both small and large places at a reasonable cost. The same goes for air travel.

There are various new regulatory regimes one could contemplate that might result in better and more plentiful air service. But without creating a big new regulatory scheme, there is a simple rule that would fix many of the problems. The Federal Aviation Administration and the Justice Department should not allow any carrier to control more than 25 percent of the flights into and out of a major airport. This would keep airlines in a competitive mode. Requiring minimum standards of service would also help.

For states and cities, the question is what to do in this environment. Here are a couple of ideas: Lobby Washington for a regulatory environment that works for everyone, not just for the airlines, and promote alternatives to air travel. This could mean paying Amtrak to provide better rail service between major cities and promoting low-cost intercity bus service.

There are few other options until we collectively remember who owns the skies and who is supposed to benefit from the use of them.