Under the microscope: The Big Three airlines are showing their colors

By Randy Keck
This item appears on page 55 of the June 2015 issue.

In 2005 I made a vow that in 10 years I would revisit a topic of increasing concern at that time: “Is the US airline industry moving in the direction of becoming a monopoly?”  Forty-seven years ago, in 1968, Simon and Garfunkel lamented to a war-weary American public, in the famous line from the hit song “Mrs. Robinson,” “Where have you gone, Joe DiMaggio?” Today a reeling American travel public can ask, “Where have you gone, Continental, Northwest, TWA, US Air (now American Airlines) and AirTran, let alone noteworthy carriers Pan American, Eastern, Western, America West, PSA, Republic, Piedmont and Allegheny?” This list is by no means complete.The Big Three reality checkWe are now left with the “Big Three” carriers American, United and Delta (all international and domestic) plus Southwest, Alaska, JetBlue, Frontier, Spirit, Allegiant and Virgin America.  This consolidating of the larger carriers into the Big Three is getting dangerously close to fitting a definition of a monopoly: exclusive ownership (as through command of supply) by a single entity or group.  A collusive style of behavior seems to be ever increasing with the Big Three in terms of squeezing the traveling public on all sides. High airfares, reduced seating space in economy cabins, reduced in-flight service, increasing baggage fees and restrictions, and a clear tightening of travel award rules and the availability of awards are the new reality for the American flying public.  The supreme insult of all of this is it’s taking place in a time of record profits in the airline industry. The reason for this depressing equation is simple. The Big Three are doing all of the above because they feel they can. They no longer have to worry about the only thing that kept them in line in the past: viable competition from other major carriers.  Currently, none of the Big Three carriers needs to be concerned about providing good service for the rank and file of their rear-cabin customers because they know their customers will experience the same package of marginal services from the other two big carriers. A scary thoughtPlease humor me for a moment and participate in the following exercise.  Think of the Big Three carriers as being a single entity. When wrapping your mind around this concept, think about how similar the Big Three have already become in terms of operations, route systems and passenger protocols. While not actually the case, it increasingly seems as though their operational policies have morphed and are being generated from a single source.  In my own mind, I am quite clear about the common intention and goal of the Big Three. It is to create a nation of (and I’m coining the following terminology) “Stepford Passengers” (reference “The Stepford Wives” films of 1975 and 2004).  These will be programmed customers who blissfully flow along and fill flights without having to make decisions about which carrier to choose, what fare to pay or even the quality of service desired because they will be so conditioned to there being so little difference between carriers.Too big to be accountableWhile this consolidating continues, the Big Three are lobbying the government for legislative protection. Some international carriers are proposing to increase their service to the US within previously agreed-upon limits, and the Big Three US carriers are claiming unfair competition on the grounds that some foreign carriers receive subsidies from their governments.  The response message from the chairman of one foreign carrier hit the bull’s-eye. “Offer the best to the passengers, and people will fly with you,” Emirates’ Sheik Ahmed said in an interview at his office at Dubai International Airport, which in 2014 overtook Heathrow Airport near London as the world’s top hub for international passengers.  He added, “They don’t mind paying maybe an extra penny to fly if your service is good. At the end of the day, it is all about service.”  The “damage control” PR types at the Big Three definitely don’t want this service-oriented message playing in prime time to the American public, especially when it’s coming from one of the world’s top 10 carriers in terms of passenger miles flown.  Richard Branson, the revolutionary founder and chairman of Virgin Atlantic, must be smiling with these developments, since he has built a company that has prospered as a result of its over-and-above service offerings to passengers.  Kevin Mitchell, chairman of the Business Travel Coalition, recently commented, “The overall impression is that the big US network airlines want to lock out independent airlines that offer lower fares, newer airplanes, faster connections, more destinations and better service.”  My take is that the American public doesn’t need to have American carriers further protected by the government from foreign competition. Instead, the American public needs to be protected from the American carriers and their passenger-unfriendly polices, which — to the detriment of all except the Big Three — are the result of industry consolidation at a level that all but insures the lack of competition.Hope on the horizonThere is cause for hope. Southwest’s business model insures the airline’s future, especially if it retains its “first two bags free” policy and other flexible policies.  Hopefully, Alaska Airlines will remain strong enough in the markets it serves to resist any future merger or takeover bids by the Big Three.  After announcing that they will begin charging baggage fees, JetBlue now must struggle to retain its loyal customers.  Relative newcomer Allegiant Air, an interesting low-fare, no-frills carrier that offers only nonstop flights, is gaining in popularity.  Virgin America’s customer-service-oriented business model has enjoyed great success in Europe and Australia and can only help to improve both the standard and competition in the industry in North America if it becomes a major player.  We must hope for the success of the smaller carriers, and the sooner the better. What can the little guy do?When major airlines have things their own way, they tend to respond to the needs of their greater customer base only when they’re overtly pressured to do so through loss of business.  One thing the individual traveler can do is make every effort to fly with any carriers except the Big Three, both domestically and overseas, whenever possible.  Go out of your way to support the smaller carriers, such as Alaska Airlines, JetBlue and Virgin America and, yes, foreign carriers as well. Check out Virgin America’s website to see an example of a company that was truly built on the concept of providing quality service. If enough passengers actively choose to avoid using the Big Three, it can help restore some balance to the industry, a balance that can be achieved only by creating challenging competition.  If we collectively choose to do nothing, the current situation will continue indefinitely and we shall share in the blame for our fate. My thesis is that it’s time for North American travelers to not only stop drinking the tea but to actively begin throwing it overboard.Deadline addendumOn a subject related to developing news, there are clear limitations involved when attempting to write for a monthly publication that has copy deadlines set far in advance. That declared, not long before press deadline, Delta Air Lines CEO Richard Anderson created a public relations nightmare for his carrier and the Big Three in general.  In attempting to avert press questioning about Delta and American having previously sought and received their own government subsidies in the form of bankruptcy and restructuring protection, Anderson used an “us versus them” diversion, tying the 911 terrorists to the United Arab Emirates. The link is that the UAE’s Dubai government is a primary shareholder in the airline Emirates, one of the carriers Anderson is seeking to prevent from having more access to the US.  Never mind that the foreign carriers seeking additional routes to the US are doing so under approved existing regulations.  Never mind that the recent airline consolidations have resulted in the downgrading of air service to many cities around the USA once served by carriers that now no longer exist. Those cities and airports badly want and need new routes run by any carriers, including foreign carriers. The unmitigated arrogance displayed by Anderson on behalf of Delta is an unfortunate indication of the level of entitlement and sway that powerful entities such as the Big Three can display if unrestrained.  In the aftermath of his offensive, outrageous public utterances, Anderson even expressed surprise at the lack of support for his position. There should be a giant red flag waving when a person who thinks out loud like this is the public face of, and is charged with running, one of the Big Three. When it comes to future air travel, I encourage readers to — with the above considerations in mind — book responsibly. Step forward or “Stepford” back.      Contact Randy c/o ITN.