Why airfares are on the rise

Airline quality is improving but that's not pushing up airfares in the U.S. Here's what is.

Airlines are doing a better job not losing your luggage and in 2012 airlines in the United States had one of the best years ever based on metrics like on-time performance and baggage handling according to the Airline Quality Rating . But it's not improved performance that's causing airfares to skyrocket this year.

MarketWatch reports that the merger of American Airlines and US Airways -- which a judge recently approved, creating the biggest airline in the world -- could lead to fare increases of 40-50 percent for some major routes.

Why? Because competition for popular routes can diminish when major airlines merge. MarketWatch points to the Miami-Philadelphia route which, pre-merger, each airline had about 50 percent of passengers on the route. Now, the new American Airlines will fly around 98 percent of the passengers using that route. Without the competition to attract customers from the other airlines prices tend to rise.

“There are definitely routes where competition will be significantly eliminated,” said Diana Moss, director of the American Antitrust Institute, a nonprofit group that aims to promote competition, at a March 19 Senate hearing on the American-US Airways deal.  The Delta-Northwest and United-Continental mergers resulted in “substantial elimination of competition on some very important routes,” Moss said. Fare increases resulted -- “and some pretty significant ones. We also saw very few fare decreases.”

And the four largest carriers having 87 percent of the U.S. domestic market certainly won't help ease up prices anytime soon.

The Wall Street Journal has a look at the routes where the new American Airlines will dominate air traffic.

Photo: Flickr/Matthew T Rader

Brace for big fare hikes after airline deals [MarketWatch]

Related on SmartPlanet:

This post was originally published on Smartplanet.com

Newsletters

You have been successfully signed up. To sign up for more newsletters or to manage your account, visit the Newsletter Subscription Center.
See All
See All