Are airline profits flying too high at consumers’ expense? (Image: Jim Glab)
New York Times business columnist James B. Stewart last week examined the airline industry’s ongoing obsessive focus on “discipline” — i.e., keeping a tight rein on capacity — and concluded that while it’s great for companies’ bottom lines, it’s not so good for travelers.
He also wondered whether airline executives’ constant reference to the term at a recent conference might constitute a signal to their competitors that they’re all better off when they don’t compete too hard against each other.
Stewart cited his own experience, recently paying $1,500 roundtrip for a flight from Newark to Indianapolis “on a cramped plane on which I had to hunch over to reach my back-row coach seat and complimentary cup of water… What’s good for airlines isn’t necessarily good for consumers, as years of mergers and consolidation are now making clear,” he wrote.
He quoted several airline CEOs at a recent conference in Miami as taking up the “discipline” mantra, which he describes as “classic oligopoly-speak for limiting flights and seats, higher prices and fatter profit margins. This year, that discipline seems to be working,” with industry profits this year projected to more than double to a record $30 billion.
Stewart talked to an antitrust specialist who suggested that airline chiefs should be careful about harping on “discipline” at such gatherings, because “that sort of talk at a conference of direct competitors in a concentrated oligopoly is a huge legal risk.”
He also cited one recent study which found that even though airlines’ fuel costs plunged in 2014 and other operating costs also declined, average fares continued to rise.
Readers: Do you think airlines are taking advantage of strong consumer demand by deliberately (and perhaps in concert) keeping a lid on capacity growth to force up prices — and profits? Or is this just good business practice?
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